Today’s Wall Street Journal carried an article on the outlook for 2010 IPO’s and how private-equity exits may comprise a large number of new issues coming to market.
I could not help but be reminded of another IPO, not of a private-equity sponsored firm, but of an actual private equity firm — in fact, the largest of them all — Blackstone Group (BX). Even amid the frenzy to get in on the offering, many mainstream media outlets questioned the wisdom of buying into BX at what was possibly (and now confirmed) the top of the market for private equity. Barron’s even ran a front cover feature [$] asserting this position and nearly 3 years later, BX shares have lost over half their value from the initial offering price, even taking into account last year’s monster rally.
People have a bad habit of making things harder than they need to be and nowhere is this more true than the world of financial markets. In a world filled with greeks, charts and financial metrics, sometimes it can be as simple as looking across the table and realizing that someone is setting you up to be the sucker.
If Warren Buffett is offering to buy something from you, know that he is taking you to the cleaners. If private equity firms like Blackstone or KKR are trying to sell you something, know that they are taking you to the cleaners.
In fact, Buffett himself often quotes the old poker quip, “If you look around the table and can’t figure out who the sucker is, it’s you.”