The major media and financial journalists seem to unanimously agree that BX had a first day gain of 13%. That’s certainly one way of looking at it, but not mine. I tend to evaluate an IPO based upon its first day trading performance, not the percentage underpricing of the issue. In this case, the first BX trades went off at $36.45 which was 17.6% above the offering price. This is not excessive and was consistent with historical underpricing of about 12-15% in the years preceding and following the bubble of 1999/2000 when the average first day return was about 65% (ahhh the good old days.)

There’s a lot of great research on the pluses and minuses of underpricing, but I’ll spare you my lecture on finance theory and stick to the real world of what happened yesterday. There was almost an impossible chance that people as smart as Schwarzman, Peterson et al would leave too much money on the table by a ridiculous underpricing. It’s kinda tough for the investment banks to misprice such a high profile client in the same industry. Don’t you think?

But here’s the reality…unless you were part of the underwriting group and a few other lucky investors, you weren’t calculating your basis at $31 and the resulting 13% gain. Given that the bulging crowd surrounding the floor trading post started off the shares at $36.45 and only a few sold at a high of $38 during the day - it wasn’t an outrageous profit for anyone trading in the secondary market.

I know the tough environment in financials and almost every other stock during the day didn’t exactly spur it to huge gains, but I think the BX action was great in one respect - POLITICAL. We already know the absurd targeting on Schwarzman’s back from Washington with “national security concerns” over China’s stake and the threat of increasing taxes on Private Equity, Hedge Funds and all the other less exciting entities that will get similarly screwed in the process. So when I saw BX didn’t go through the roof, I felt a little relieved that the politicians wouldn’t have extra ammunition to stir the populist envy.

As I said, I don’t look at the first day of BX as a gain. I calculate it as a 3.8% loss - the difference between the first floor trade and the close of $35.06. The VWAP for the first day was $36.27 and I expect that most investors who bought yesterday are holding this stock at prices beneath their cost basis. It was a well-priced and well-supported offering but one day is not a scorecard whether its a gazillion % return for Schwarzman, a 13% return for underwriters, or a loss for most of the crowd. BX has a long way to go before it can be adequately measured and during that journey investors will have to value it based upon the same fundamental metrics that Blackstone uses.  Let’s give the market some time to figure out the right price before we judge this IPO.