Will Carlyle Group's IPO Make You Rich?
The private equity firm Carlyle Group has decided to re-up its bid to go public after an abandoned attempt last September. In a regulatory filing Monday, the firm announced its intention to sell 30.5 million shares priced at $23-$25. If successful, it could raise as much as $762 million.
Founded 25 years ago by a handful of Washington, D.C., businessmen, Carlyle is one of the largest and best-known firms in its industry. Its portfolio includes more than 200 companies and has $147 billion in assets under management. Some of its best known deals include the purchase and subsequent listing of rental car company Hertz Global Holdings and donut maker Dunkin' Brands Group.
As I discussed in a three-part series on private equity firms, Carlyle will join a handful of others that have gone public in recent years to varied success. The largest of them, Blackstone Group (NYS: BX) , was the first to do so in 2007, and has since seen its share price plummet by 58%. Kohlberg Kravis Roberts (NYS: KKR) and Apollo Global Management (NYS: APO) followed suit in 2010 and 2011, respectively -- the former's shares are since up 49% and the latter's are down nearly 25%. The recently listed Oaktree Capital Group (NYS: OAK) , an alternative asset firm founded by a man highly respected by Warren Buffett, is trading at the end of its first week for less than its IPO price.
Although these firms are led by some of Wall Street's richest and savviest operators, investors are down on them for two reasons. First, as I discussed last week in relation to the tepid reception of Oaktree's listing, investors struggle to value the performance fees in private equity funds due to their convoluted ownership structure. And second, there's a perception that the public markets are merely the dumping ground for the industry. Unlike most companies, which sell shares to raise capital for growth, the firms above went public after experiencing exceptional growth. If they don't need the capital, maybe they're just going public to help their founders get rich at the public's expense?
Foolish bottom line
At the end of the day, I'll be the first to admit that I'm not a fan of the private equity industry. Despite its claims to the contrary, I believe private equity firms over-leverage their portfolio companies simply to line their own pockets -- and notably not the shareholders of either the subsequently listed portfolio companies or the private equity firms themselves.
It's for this reason, in turn, that I urge you to avoid a speculative bet on a company like Carlyle Group in favor of the stocks identified in our recently release free report: "The Stocks Only the Smartest Investors Are Buying." In it, you'll find the name of a major financial institution that Warren Buffett recently invested in, as well as the identity of a smaller firm that might have interested him in his younger years. To find out what companies I'm referring to, click here now -- it's free.
At the time this article was published Foolish contributor John Maxfield does not have a financial stake in any company mentioned above. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.