Gabriel’s scarcity rent – it’s management stupid!

China and Blackstone: bad news for capital markets, good news for private equity

23 May, 2007 at 9:37 am 3 comments

Today I’m going to write simple. From simple fact I’m going to draw three simple conclusions.

Capital markets are hard. They judge you every day: what you sell, what you earn, what you say, what others say. Sometimes they punish you for something you have not done, or they reward you for something another similar company has done. Sometimes bull markets just panic and leave you wondering why.

That’s of course if you are a manager of a public held company. You’ll have to be aware of what signals you make, and receive and correctly understand others’.

But there’s another option: private equity. If desire among MBAs was to be two-worded it would become “private equity”. Private equity lets you manage in another way. You don’t have to respond to markets every day. You can plan for the long run. And you face far less regulation than you would otherwise. There’s only one inconvenient: the market is not dumb: it’s harder to get capital.

Now for the simple fact:

• There’s a new signal in the market: the Chinese government is taking a 9,9% stake in the forthcoming public offering of Blackstone. They are even willing to renounce voting rights to get that stake.

Blackstone China chief Antony Leung looks quite happy with it

And now for the three simple conclusions:

• Bigger money is going to private equity. That would solve one of their main drawbacks. And that means a signal for attention to capital markets. Are they going to be less relevant in the future? Are the decisions going to take place somewhere else?
• Are those more than $1-trillion in Chinese foreign reserves moving elsewhere? A worrying signal for the US treasury.
• And US presidential candidates will need to freshen up with private equity. They are going to talk about this.

We’ll see

Entry filed under: b-school, Business, Economics, Economy, MBA. Tags: .