Blackstone Ready for Big Open

The IPO is expected to open at $40 to $43 a share.

Author:: Mark DeCambre
Publish date:: Jun 22, 2007 9:32 AM EDT

Updated from 7 a.m.

Blackstone Group's march on Wall Street is under way.

The private-equity firm launched its IPO late Thursday at $31 a share, the high end of its expected range. The offering saw heavy demand, much of it from overseas investors who shrugged off a tax storm brewing in Washington. Early Friday, the stock was indicated to open at between $40 and $43 a share.

The pricing raises $4.13 billion and vaults the private-equity titan ever closer to Friday morning's eagerly awaited debut on the

New York Stock Exchange

Sal Morreale, IPO trader at Cantor Fitzgerald, says international appetite has been a big driver for the Blackstone IPO and may have led to the company deciding to price its shares a week ahead of expectations.

"What's pushed the deal is the international guys are clamoring for the deal," Morreale notes.

TheStreet.com

was reporting early Wednesday that the offering was five or six times oversubscribed and demand has been escalating on the eve of the IPO. Some recent reports suggest demand might be 10 or 12 times the 133 million partnership units Blackstone expects to sell into the public market.

Blackstone's shares are expected to start trading Friday morning under the ticker BX. The IPO is expected to draw the most frenetic action since

Nymex

(NMX)

shares soared 125% in their first day of trading back in November.

The deal marks another milestone in the growth of alternative investment firms such as hedge funds and private equity. Blackstone's IPO is the first public offering for a private-equity firm, following February's successful offering by hedge fund

Fortress Investment Group

(FIG)

. The Blackstone deal had been expected to price next week.

According to a public release issued by Blackstone, the company priced 133,333,334 common units.

The deal's underwriters --

Morgan Stanley

(MS) - Get Report

and

Citigroup

along with

Merrill Lynch

(MER)

Credit Suisse

(CS) - Get Report

Lehman Brothers

(LEH)

and

Deutsche Bank

(DB) - Get Report

-- have a 20-million-share over-allotment that they can purchase up to 30-days after the sale

Blackstone and other alternative investment outfits have come under intense scrutiny as of late. The Senate Finance Committee is considering a bill that would increase the tax rate for those entities.

Bloomberg

reported Thursday that U.S. Reps. Henry Waxman (D., Calif.) and Dennis Kucinich (D., Ohio) asked

SEC

Chairman Christopher Cox to delay the IPO's pricing, saying the deal may present "investors and the public with new and undisclosed risks."

The Fortress and Blackstone IPOs used a loophole in the existing tax code that allows them to benefit from a 17% partnership tax rate, rather than the 35% rate that typically applies to conventional companies.

Blackstone made a statement last Friday warning investors to take into account the implications tax legislation might have on its business and share valuation.

The deal has drawn scrutiny in part because of the wealth being generated for the firm's leaders. Blackstone CEO and co-founder Stephen Schwarzman looks to rake in $677 million from the IPO and achieve a net worth of $7.5 billion from his stake in Blackstone.