Blackstone Group had a stellar debut on the New York Stock Exchange Friday: After pricing at $31 late Thursday, the stock opened up $5.45, or 17.6%, at $36.45. At the bell, Blackstone's shares closed at $35.06.
The successful offering marks the biggest U.S. IPO in five years, and could open the floodgates for other alternative investment funds to go public. But the private-equity boom is coming under growing fire in Washington, with Congress moving to increase taxes on hedge funds and private-equity firms.
CNBC followed the Blackstone IPO all day Friday. Here is a sampling of the coverage:
Reaction: "Solid, if Not Spectacular"
Analysts remain split over just how far Blackstone will go. On CNBC's "Power Lunch," Michael Gray, a private equity fund formation expert and attorney at Neal Gerber Eisenberg, praised Blackstone's co-founders as "great entrepreneurs."
He compared CEO Michael Schwarzman and Senior Chairman Pete Peterson to Bill Gates, who likewise "founded his company and took it public. They built an institution." He believes buyout arms of Goldman Sachs and J.P. Morgan, as well as private equity giant D.E. Shaw, are likely to seek IPOs next.
But David Wighton, Financial Times' NY bureau chief, is less enthusiastic: He blamed the "atmosphere in Washington" for taking "some of the froth" of the share price. The editor pointed to Fortress Investment Group, the first U.S. private-equity firm to go public -- whose share price "has come off sharply in recent weeks," amid talk of tighter regulations and higher taxes.
Only The Beginning
Ken Fisher, chief executive of Fisher Investments, told CNBC’s “Morning Call” that private equity is in the middle of a “perfect storm” -- and he expects more IPOs like Blackstone's.
He said P/E ratios are lower in relation to interest rates than they’ve been in about 25 years. This allows a company to borrow money to buy back its shares or to take over a competitor, boosting earnings per share.
“The effect of all that is the private equity firm can do the same thing,” Fisher said Friday. “It’s an arbitrage. It’s basically free money to the private equity firm."
The strategist believes that "we’re going to see to see a lot more of these deals in the next few years until we get to the point where the interest rate – P/E ratio arbitrage potential goes away.”
Taxes Could Drive Private Equity IPOs Offshore
Douglas Lowenstein, president of the Private Equity Council, told CNBC’s “Squawk Box” that a bill pending in Congress could drive private equity offshore.
The legislation, introduced last week by Senators Max Baucus (D-Mont.) and Charles Grassley (R-Iowa), would boost the tax rate to 35% from 15% on private equity firms that go public. Lowenstein said the hike would discourage U.S. private-equity firms from going public and undermine the nation’s financial competitiveness.
But the bill would permit Blackstone to continue paying a 15% capital gains rate until 2012.
Will Legislation Punish Partnerships?
Rep. Sander Levin (D-Mich.) told CNBC's "Power Lunch" that a tax bill he's backing is geared to "create fairness" -- and is not targeting private-equity companies.
Levin and other congresspeople -- including Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee -- are sponsoring legislation that would render any income received from a partnership in compensation for services as ordinary income for tax purposes.
If the legislation passes, managers of investment partnerships ostensibly may find themselves paying bigger tax bills in some cases.
But Levin insists the bill would not stifle management initiative: "I don't think we want economic growth on the basis of unfair taxes,” Levin said. "I want to foster economic growth. It needs to be done within a structure of fairness and that's what this is all about."