I previously posted a few times about Blackstone, Fortress, and KKR going public. I've always felt that it is not a great idea for private equity firms to go public. You can read my other posts but in general the public does not understand how private equity firms work, are not suitable investors for private equity, and do not have the patience to invest in private equity. The markets have borne out these truths, hammering the stocks of Blackstone and Fortress in the US as well as KKR's listed vehicle in Amsterdam. Some of these firms are probably valued less than their NAV.
Perhaps the largest untoward effect of the revealing of private equity secrets has been the extreme jealousy and attack at firm founders and what is considered exorbitant or even egregious pay. As a result of the IPOs of these firms, the spotlight has been put on the industry and it for the most part is a negative one. The government continues to want to come after carried interest and continues to want to increase revenue and cutoff any tax loopholes in all of private equity, be it venture, hedge, or buyout categories.
You already know how I feel about the effects this may have on our competitiveness as a country - there must be incentives and rewards for innovation and risk taking. Take that away and people will go elsewhere, be that the London AIM or Amsterdam exchanges.
Given that many firms still want to follow suit into the public market and they want to improve their public image, firms are responding to public inquiries. Now that we are in a credit crisis, firms are even announcing to the public that their funds are not affected and that their assets are safe.
Back in the day as private firms, this would have never happened. Firms would attend to their matters privately. Investors would get their distributions when they came and all parties would be happy.
I continue to believe that private firms should stay private and do what they do best.
Comments