Don't Get Sucked into the KKR IPO

Let's start by taking a look at the recent IPO of Tesla Motors, Inc. (TSLA) to get a feel for the environment KKR is going to trading in. Tesla shares were initially offered at $19 per share. They then jumped above $30 and are now trading below their offered price at $15.54.

What does this tell us? Investors are starving for some IPO excitement -- we haven't exactly seen a lot of that during the past few years -- are are likely to push prices higher, but there isn't a lot of underlying support to sustain the rally.

Now let's take a look at KKR rival the Blackstone Group (BX). Blackstone had its IPO at $31 per share three years ago in 2007. Blackstone is now trading at $9.40, down 36% this quarter, and is struggling to find support as the S&P 500 continues to languish. Blackstone's performance provides a strong indication of what we can expect in the near term from KKR, which is tepid growth at best.

Ultimately, it doesn't look like KKR is going to have a promising IPO, and investors risk getting caught in the initial run up only to lose money as the excitement wears off.

Of course, KKR could be a nice longer-term trade if you have the patience to wait for share prices to drop below their initially offered prices, but I would watch for a turnaround for Blackstone for confirmation of any positive momentum in the industry.

Disclosure: Hansen does not own shares of the stocks discussed above. Positions can change without notice.