Steve Schwarzman’s Blackstone Group (BX), which dumped stock on public investors at the peak of the private-equity bubble, recorded a $66.5 million loss (6 cents per share excluding compensation), missing consensus of a 12 cents per share profit. The loss was attributed in part to an “evaporation” in leveraged buyouts. Blackstone did $1.2 billion in deals this quarter compared with $42 billion in deals in the same period a year earlier. Bloomberg:
“Everyone who thought that private-equity and hedge funds would be the sexy new entrants have been sorely disappointed,” said Benjamin Phillips, managing director of strategic analysis at New York-based Putnam Lovell, an investment-banking unit of Jefferies Group Inc. “The key for these types of companies is they’re going to have to diversify the sources of revenue and earnings.”
Blackstone had a net loss of $251 million, or 97 cents a share, including costs related to the vesting of executives’ ownership stakes as part of the initial public offering. The company has said it will continue to post net losses during the next five years because of the vesting expenses.
As lending institutions continue to face liquidity crises, funding for LBOs and other private equity transactions has dried up. Until the credit crisis eases, the type of deals from which Blackstone earns the bulk of its revenue will remain scarce.