Bad Day at Blackstone

Is it time to conclude that Blackstone's I.P.O. was the most disappointing debut since New Coke?

As most market watchers already know, Blackstone has been on a slow and steady downward spiral since going public in June. Shares were down 22 percent from its $31 initial price even before today's quarterly earnings announcement dealt BX an additional kick in the pants.

But today stock in Blackstone finished the day down more than 8 percent from its $24.28 closing price on Friday, on unexpected third quarter loss of 44 cents a share. These are Blackstone's first full quarter results since going public, and analysts were looking for 30 cents in earnings.

Three of Blackstone's four business units actually increased revenue for the quarter. The major causes of its $113.2 million in losses were $802.6 million in non-cash, one-time charges for items linked to its initial share sale (we warned you), and real estate division revenues tanking 44 percent. Apparently, weakness in the subprime residential lending area spread to general commercial real estate lending. Go figure.

So now, Blackstone founder and C.E.O. Stephen Schwarzman is toeing the delicate line of seeming concerned, yet not too concerned, about the tricky business of paying for all those big-ticket purchases Blackstone made last spring.

As for Blackstone's more minor masters of the universe, they might find themselves looking wistfully at the stock chart for Goldman Sachs, cursing themselves for fleeing the bulge-bracket scene for the siren call of private equity.

Goldman has had enviable success in clawing its way back from the credit market shock—now about 33 percent above its one-year low in August—while Blackstone has only gone steadily to hell in a hand basket. Do not pass "Go," and certainly do not collect $200.

Others may wish they were in London right now, earning their carry in sterling at British hedge fund Man Group. It managed to go public this year without falling apart in a similar fashion. The fund took a hit in August but is now back up to July levels.

But chin up, Blackstone folks—the glass is half full!

You could be working at Countrywide Financial, the stock price of which was cut by almost two-thirds since Blackstone's June I.P.O. Or Beazer Homes USA, which is also down more than 60 percent since that time and unlikely to get off the ropes anytime soon. Blackstone's 30 percent drop seems not quite so horrible.

Nevermind that Pete Peterson's glass is all full—he's probably pouring himself another flute of champagne and thanking God that he took the money and ran back in June.

by Liz Gunnison

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