When the Blackstone Group (NYSE: BX) reported its Q4 results, the company's CEO, Stephen Schwarzman, said that the stock price was "dimwitted." Well, since then, the stock price has surged from $4.87 to $13.44
What happened? Perhaps it's the fact that the financial system has stabilized.
But, if you take a look at the Q1 results (announced yesterday) for Blackstone, things still look ugly. In fact, on the conference call, President Tony James gave a particularly negative view on the economy. For the most part, it looks like it will take a long while to get things back on track.
OK, as for the Q1 numbers: Blackstone sustained a $231.6 million loss for Q1, with revenues down 31% to $47.1 million. Simply put, the private equity business has been dead (except for a few exits, such as the $2.9 billion deal for Stiefel Laboratories). And, the real estate portfolio is under extreme pressure.
But, there are still some silver linings -- such as the hedge fund business (which attracted $1.5 billion in new capital). The advisory business was also strong.
However, a nice surprise was the resumption of the $0.30 dividend. After all, Blackstone has a lot of liquidity. So why not give some back to investors?
Finally, the fact remains that Blackstone has ultimate control over the private equity portfolio. That is, the firm does not have to exit it positions until it feels it's the right time. And, it also helps that many of the portfolio companies are in non-cycle industries and have little debt coming due in 2009 and 2010. In other words, Blackstone will likely see some strong returns once the economy begins a sustained recovery.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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