Blackstone IPO Is a Must-Miss

The IPO aims to raise about $4 billion in the public markets by selling 10% to 15% of the firm that manages all that money.

I expect this offering to sell like ice water in the Sahara if the Feb. 9 IPO of Fortress Investment Group(FIG Quote) is any indication. The hedge fund manager, with $30 billion under management, became the first private-equity/hedge fund management firm to sell shares to the public. That IPO soared from an offering price of $18.50 a share to $35 by the time shares opened for trading, as investors clamored for a piece of the offering.

Shares have since dropped back, closing at $27.18 on March 28. But I don't expect that the 22% loss that investors who bought at $35 suffered will deter many prospective Blackstone buyers, since those Fortress investors who got an allocation of shares at $18.50 made a quick 90% by flipping their shares.

Up, Up and Away

On form, the Blackstone Group IPO should be even more popular. The group manages almost twice the assets of Fortress. It and its co-founders, Pete Peterson and Steve Schwarzman, have a much higher profile on and off Wall Street -- thanks to Schwarzman's 60th birthday party, which featured 1,500 guests and entertainment by Rod Stewart.

The returns its funds have garnered -- for example, the annual 23% on average for the company's private-equity funds since 1987, about twice the average return for the S&P 500 Index for the period -- are enough alone to create the kind of demand that drives an IPO up in price on the first day of trading.