NEW YORK (
shares continued to tumble on Wednesday despite an upgrade from Sterne Agee analyst Jason Weyeneth.
Weyeneth raised his recommendation on Blackstone to "Buy" from "Neutral," arguing investors are excessively discouraged over the "muted" outlook for near-term realization of performance fees. He believes that pessimism is already reflected in the "unit" price, the rough equivalent of share price for most publicly-traded private equity firms such as Blackstone.
Blackstone Chairman and CEO Stephen Schwarzman
Investors didn't appear convinced of that argument on Wednesday, however, as shares opened flat and were down by 0.83% with about an hour left in the trading day.
Blackstone shares are down nearly 16% year to date, similar to other publicly traded private equity firms such as
Fortress Investment Group
KKR & Co.
Apollo Global Management LLC
. Two other private equity firms that have gone public recently,
Oaktree Capital Group
have also seen their shares struggle.
During a conference call last month, Blackstone executives said turbulent markets have prevented them from selling assets, which would likely lead to gains for unitholders in the form of dividends.
"If markets hang in there like generally - like we see them now, I think you'll see realizations ramp up starting late this year, and next year will be a much stronger year as will that following year or two," said Blackstone President Tony James on the April 19 call.
Markets haven't hung in, however, as anxiety over the future of Europe has spilled into U.S. markets, and the S&P 500 has fallen nearly 6% since Blackstone's call. Blackstone shares, meanwhile, are down more than 20% since that time.
Still, Weyeneth argues things have gone too far. He cites "strong net flows in each of the company's business segments, top decile/quartile performance across all products, and substantial dry powder to take advantage of current market dislocations."
Indeed, Blackstone announced late Tuesday it had acquired budget hotel chain
for $1.9 billion.
Weyeneth also contends institutions are increasingly investing in "alternative" products such as hedge funds and private equity, as well as "top diversified managers," such as Blackstone.For the time being, however, stock market investors
Written by Dan Freed in New York
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