Blackstone Group: Going public because it can

The late 1960s hit song by the Beatles titled "Revolution" has been applied to a lot of different situations and circumstances. The Blackstone Group (NYSE: BX) IPO deal falls right into that description. After 16 years in the investment banking-research boutique industry and having been involved with over 150 IPOs and secondaries -- nothing is surprising.

My old firm, Wessels, Arnold and Henderson (now part of the Royal Bank of Canada. NYSE: RY) was "on the cover" of the IPO of VeriSign Corp (NASDAQ: VRSN) back in 1998. After the deal was pitched and Morgan Stanley (NYSE: MS) was named the "lead" and we at Wessels, the co-managers, I remember asking a VeriSign executive why go public now? His response is applicable to almost any IPO or secondary offering: "Because we can." Three little words, but it sums it all up.

Private equity -- those two key words have captured a cache in the investing world. Private equity evokes a certain mystique. "These guys know what's REALLY going on". Well, Blackstone is jumping from the frying pan, right into the fire. Now, it is a public entity, but it will still carry that "mystique". Information flow will not be like a regular publicly-traded company. The investing world will know only what Steve Schwarzman, Blackstone's CEO, wants them to know.

The die has been cast and this is the first private equity company to go public. Several more are watching carefully and closely and if the opportunity arises, the investing world will clamor for more. The retail investor will be the dominant owner and trader of Blackstone and other future private equity IPO's, because they feel that this represents their only opportunity to journey into this mysterious world. Institutional involvement will be heavy at first, but retail will represent the lion's share of trading.

So, KKR and other private equity firms are also contemplating IPO's. Why? Because they can...

Georges Yared is the CIO of Yared Investment Research.