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Stock Market and Firm Essay

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Background
The Blackstone Group (Blackstone) is a private equity firm founded in 1985 by two former employees of Lehman Brothers. In May 2007 the firm had $88.4 billion under management and had grown 41% annually since 2001.

The firm operated in several business groups but distinguished itself from other firms by extensive collaboration across divisions. It was divided into Corporate Private Equity, Real Estate Funds, Marketable Alternative Asset Management, Corporate Debt Funds, and Advisory Services.

In 2007 Blackstone started to evaluate the option of taking the firm public. Reasons why the firm should do an IPO, outlined by the firm’s internal project group, included:
• Permanent pool of inexpensive capital and a wider group …show more content…

Third, to further smooth out potential fluctuations in the share price the firm guarantees a dividend during the first years after listing.

The fact that the stock market tends to be short-term focused further shows the importance of having the MLP structure. To maintain the long-term focus on investments the firm needs to separate the governance of the firm from the shareholders and the limited voting rights will ensure this.

2. If you were a limited partner in Blackstone, how would you view the structure Blackstone has put in place to go public?

As a limited partner in Blackstone I would consider the structure as chosen to ensure my interests. Given the fact that the firm chose to go public for the opportunities that a listing brings, it seems to be the best way of doing it.

I would be most worried about that the firm would try too much to stabilize the share price and fulfil the interest of the shareholders by focusing on short-term profits. Many of the limited partners in a private equity fund are pensions funds or similar and do not mind to lock their money over a longer time period and, by doing so, seek the long-term profit that the private equity firm can offer. I will highlight the two things that make me confident that my interests as a limited partner will be maintained with the structure that the firm is implementing. First, the structure allows

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