With Echoes of Fortress and Blackstone, Apollo Goes Public

(March 30, 2011) – Leon Black’s Apollo Global Management, originally slated for a 2008 initial public offering (IPO), has finally gone public.

The firm had sold shares in a private placement in 2007, hoping that it would be the first step toward a New York Stock Exchange (NYSE) listing; however, when markets turned sour in 2008, the public offering was delayed until now. The underwriters for Apollo’s offering are Goldman Sachs, JPMorgan Chase, Bank of America Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, and UBS.

With shares priced at $19 and put on the market Wednesday morning – raising the firm $565 million in total – the deal indicates, at least for some, renewed confidence in the power of private equity to bring investors outsized returns. However, the IPO also rekindles memories of Stephen Schwarzman’s Blackstone public offering in 2007, a deal that many commentators, even at the time, suggested indicated that those in the know were cashing out and that a peak, of sorts, had been reached. The Blackstone IPO priced shares of the company at $31; as of March 30, 2011, the share price was trading under $19. Filings released at the time of the IPO showed that the firm’s upper echelon executives were awarded compensation in the billions, and that the firm would incur large losses as it paid out its founders. 

The IPO of Fortress Investment Group – the first of any private equity group to go public in America – has proven equally poor for investors in hindsight. The 2007 offering was priced at $18.50; the stock was trading at $5.67 Wednesday morning.

Early trading in the stock was muted, with Apollo shares trading down nearly 3% at the close of markets Wednesday. Commentators were quick to draw implications. "Now investors really are going to turn an icy shoulder to any other private equity firm that comes to the marketplace," David Menlow, president of IPOfinancial.com, told Reuters. "They may have priced at the top and (sold more shares), but it's the performance of the stock that's going to call the shots,” when it comes to other private equity giants executing IPOs, he added. According to the news agency, sources say that Carlyle Group and Oaktree Capital Management are both seriously considering IPOs.