Posts filed under “Corporate Management”
Blackstone? Public? Say it ain’t so, Joe!
I snickered when I first heard the news; it sounded more like a trial balloon. The air was thick with irony the day Blackstone Group slipped the idea of selling 10% of the firm for a mere $4 Billion clams.
The firm has been in the vanguard of promoting the concept that companies "back away from being public," on the onerous requirements of SarBox, and lastly, the undervalued nature of the equity markets.
I still don’t believe it. If it turns out to be true — and so far, its just a rumor — I would have to do a 180 on my prior views on the firm and its leadership.
It would mean that all those high falutin’ ideas turn were just so much pablum. BG would be like every other Wall Street entity, a crowd of snake oil salesman, only this crew were a little slicker in their patter, a little smoother in the line of bullshit they were pushing.
The first thought that should pop into your head whenever you read or see someone touting a position that seems "off" is to ask "What are these guys selling?" Now we know: Themselves.
What was in it for them to press an argument that may turn out ot be mere PR spin? More than money — they created an image, a brand with an air of cool around it, that greased the skids for their takeovers; To hell with the public markets, we have so much cash that we are above all that nonsense. Quarterly conf calls? Fuggedaboutit! I got your Sarbox right here!
Only all those intellectual arguments may turn out to be just another set of lies from another sleazy commission based broker. Now that it has served its purpose, we are on to the next argument.
Barron’s Mike Santoli points out that:
"Many are asking why Blackstone chief Stephen
Schwarzman would reverse his stated anti-IPO position and subject
himself to the quarter-by-quarter scrutiny of a public company, which
he has decried in the past. Well, Schwarzman and other LBO artists buy
average companies which they perceive to be under-managed or misvalued
by the public, and retool or leverage them up in private.
One thing’s for sure: Schwarzman (he of the $3
million birthday party and Fortune magazine’s recently crowned "New
King of Wall Street") doesn’t consider his company anything near
"average," or "under-managed." And he and his partners are probably
confident that, like Goldman Sachs
(GS), Blackstone can enjoy the rewards of public ownership without ever
divulging exactly how its money is made. While the investment climate
is strong, that is.
But mustn’t this mean the peak of the easy-money
craze for financial engineering and ever-larger private buyouts?
Probably not. After all, Goldman’s IPO didn’t mean happy days on Wall
Street were about to come to a crashing end. That didn’t happen until
10 months later."
When the Smart Money sells, ask yourself who is buying. Answer: Dumb money.
10 Months? That sounds about right . . .
Business as Usual?
Barron’s MARCH 19, 2007
Blame the professors: Just as the option backdating scandal started with academic researchers noting mathematical anomalies, so too might the next brewing scandal: the I/B/E/S Analyst ratings back dating scandal.
According to a Barron’s article by Bill Alpert (buried on page 39), several professors have discovered what they describe as 54,729 non-random, ex-post changes out of 280,463 observations — a little over 19.5% of analyst recs (abstract below):
"The professors found
almost 55,000 changes that had been made in the I/B/E/S database of
stock-analyst recommendations maintained by Thomson, the Stamford,
Conn., firm that is a leading vendor of financial data. The alterations
made Wall Street’s record of recommendations look more conservative –
hiding Strong Buy recommendations and adding Sell recommendations from
1993 to 2002. That is a period for which Wall Street has drawn heat and
government sanctions for touting Internet bubble stocks.
As a result of the changes, the stock picks shown in
the database would have created annual gains that were 15% to 42%
better than the originally recorded recommendations, using a trading
strategy based on analysts’ recommendations."
The firms were the most significant participants in the data backdating were also the firms who had the closest relationship between banking and research and were the hardest hit by the Spitzer enforced settlement.
From page four of the academic working paper notes exactly how significant this was:
"Why do the historical data now look different than they once did? The contents of the database changed at some point between September 2002 and May 2004, a period that not only coincided with close scrutiny of Wall Street research by regulators, Congress, and the courts, but also saw a substantial downsizing of research departments at most major brokerage firms in the U.S.
The paper outlines four types of data changes: 1) non-random removal of analyst names from historic recommendations (anonymizations); 2) the addition of new records not previously part of the database; 3) the removal of records that had been in the data; and 4) alterations to historical recommendation levels.
The net result of this was to make many specific trading strategies appear better in retrospect than they actually were. Buying top rated stocks and shorting lowest rated stocks, based on the changed data, now perform 15.9% to 42.4% better on the 2004 revised data than on the 2002 tape, the professors state.