It must be something in the water, but Blackstone Group LP's workers produce nine times the profit as their counterparts at Goldman Sachs Group Inc. (NYSE:GS), according to an analysis by Bloomberg News.
Blackstone's 770 workers produced an average of $2.95 million in net income last year compared with $360,000 at Goldman Sachs which has about 31,000 workers, Bloomberg says. This raises some interesting questions about how the market will value the New York-based hedge fund company.
If investors value it like Goldman, it will trade at about 10 times earnings with a market capitalization of $23 billion while a Fortress Investment Group LLC (NYSE:FIG) multiple would value Blackstone at about $29 billion, Bloomberg News says. Goldman's market capitalization is $87 billion and Fortess Investment Group's is $37 billion.
Blackstone, though, will trade at a premium to both companies -- at least at first -- because its performance has been amazing over the past few years.
There are many questions that need to be answered before investors will jump on the Blackstone bandwagon.
For one thing, as my colleague Amey Stone pointed out, Blackstone CEO Stephen Schwartzman was publicly disparaging the idea of an IPO at a time when preparations for one were underway. People are suspicious of the timing.
Are Schwartzman and his associates looking to cash out while the going it still good? Will there be another mega IPOfrom a big private equity shop such as Texas Pacific Group or Carlyle Group? Are earnings from private equity firms predictable enough for Wall Street analysts to be able to forecast them accurately?
Jenny Anderson of the New Yok Times argues that it's all about money.
"Going public will mean elephantine payouts for a small group of individuals who have been minting money on an impressive global liquidity glut," she said.
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