As expected, Blackstone flipped from a publicly traded partnership to a C-Corp on Monday. And the asset manager’s stock jumped nearly 5% to close the day at $46.58 per share, pushing the PE shop’s market cap to more than $55 billion and its stock price beyond its previous all-time high.
Blackstone announced in April it would make the move, joining KKR and Ares Management, which flipped after the 2017 US tax bill dropped the effective corporate tax rate from 35% to 21%. Blackstone hopes to make its stock more accessible to the average retail investor and eliminate the burdensome K-1 tax forms that had to be filled out for publicly traded partnerships. It also aims to make its financial metrics easier to understand.
But perhaps most importantly, flipping to a C-Corp will make the firm’s stock more accessible to index funds and ETFs.
Blackstone’s stock has risen about 55% this year and around 30% since the April announcement. That will no doubt please shareholders as well as co-founder and CEO Stephen Schwarzman, who has long lamented that his firm was significantly undervalued on the public markets. And it’s happening during a year when the firm has already authorized a nearly $1 billion stock buyback program.
KKR hasn’t experienced the same jolt since it flipped to a C-Corp in July 2018. Its shares are trading at roughly the same price a year later, but at $26.88 per share, it’s still up about 30% year-to-date. Meanwhile, Apollo Global Management plans to make the change in 3Q, while The Carlyle Group has resisted the temptation to join its counterparts.
However, analysts have said Blackstone’s performance may cause Carlyle to follow suit, per The Wall Street Journal. Blackstone and KKR have outpaced the S&P 500, which is up about 17% so far this year.
Blackstone will announce its 2Q earnings in an investor call July 18.
In the meantime, the firm’s real estate division is reportedly nearing a deal to sell a portfolio of Spanish mortgages valued at €1.1 billion (about $1.2 billion) to CarVal Investors. Goldman Sachs and Elliott Management also bid for the assets as Spain’s housing market began to recover after that country’s financial crisis.