Blackstone: We're On Top of the Stinking Pile!

It's been 15 long and unforgiving months since Steve Schwarzman took the Blackstone Group to the public market. Ever since then, in every interview with the press and probably in most conversations with his partners and investors, Schwarzman has tried and mostly failed to explain why Blackstone shares have been so poorly received by public shareholders.

But now, finally, Schwarzman has a new defense: We're actually the best of the worst.

During an interview at a Dow Jones private equity conference at the Waldorf Astoria Wednesday, Schwarzman was asked (again) what he has to say to the Chinese investors and others who invested money in his firm at the initial public offering, now that Blackstone shares are down more than 50 percent. Here's his response:

"Blackstone has actually performed better than most financial stocks. Because of the timing when we went public, the rest of the world looked wonderful and we were in effect the first firm that looked like it was affected by the credit crisis. Now that we're a year and a quarter into this you can see that the average financial stock around the world in virtually any country has been basically crushed so there's nothing outstanding about Blackstone. We're down less than the Chinese stock market."

Good try, Steve. But it isn't quite true.

Since its debut on June 22, 2007, Blackstone's shares have fallen by 57 percent. It's true that it's outperformed some stocks like Morgan Stanley (-75%), Merrill Lynch (-76%), and Citigroup (-73%).

But it's still underperforming others, like Goldman Sachs (-49%) and J.P. Morgan Chase (-23%). And its losses precisely match that of fellow alternative asset manager Fortress Investment Group (-57%).

It's even underperformed the Shanghai Composite Index, which is down by 53 percent since June 22, 2007. Possibly Schwarzman's talking point was given to him before the market opened this morning. Blackstone shares fell by 10 percent during Wednesday's session.

And Blackstone shares are also still doing worse than the financial sector in general. The S&P Financials index has fallen by 48 percent since June 22 of last year.

In desperate times, being the best of the worst makes for a pretty solid argument. If only it were true.

by Megan Barnett

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