Apollo’s Leon Black Laments Going Public

Leon Black, CEO and founder of Apollo Global Management, has second thoughts about taking the private equity titan public eight years ago. It seems investors just don’t get poor Apollo and undervalue its stock.

Asked at an investing conference whether he has any regrets about going over to public ownership—its IPO was in March 2011—Black replied: “Regrets? Absolutely … The public market doesn’t understand creatures like us very well.”

A whole array of big-time PE firms have gone public over the last decade. But shares of Carlyle, Blackstone, and KKR, as well as Apollo, have underperformed the S&P 500 and other stock indexes. Since its public offering, Apollo has gone up 69%, while the S&P 500 has climbed 255%, FactSet data indicates.

“I think we trade at half where we should be,” Black said, according to a Pitchbook account. “It’s not just true of us; it’s true of Blackstone and others.”

The allure of public ownership was that the principals could monetize their stakes right away, employees would gain incentives, and a PE firm would get the capital to expand globally. The downside, of course, was scrutiny and meddling by regulators and investors.

Lately, Apollo and other public PE shops recently have tried to remedy their lagging share prices by switching from partnerships into C corporations, on the idea that they’d then be included in indexes and mutual funds.

The first to do this was KKR in May 2018. That seems to have worked out well: Its stock surged 33% until September, when it ran into the fourth-quarter down market. And despite last month’s slippage, KKR still is up 19% from the IPO.

Since the announcement it was switching to a C corp format, Apollo’s stock has slipped 4%, but that may be due to the recent downdraft. KKR, which announced its conversion a few weeks before, is up 5% since.

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