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Blackstone to become corporation as assets top $500B

Blackstone plans to convert to a corporation from a publicly traded partnership, a step that opens up the stock for inclusion in indexes, after watching two rivals benefit from the move. The shares jumped in early trading.

Changing the company’s structure will increase the firm’s “ability to reach a dramatically larger audience,” said CEO Stephen Schwarzman. “We’d handicapped ourselves by our corporate form,” he said, adding, “We’ll make this easier for retail investors.”

Private equity firms including Blackstone, the world’s largest alternative asset manager, have seen their stock prices lag since going public even as investors have poured money into their buyout, credit, real estate and other funds.

Changing the company’s structure will increase the firm’s “ability to reach a dramatically larger audience,” said Blackstone CEO Stephen Schwarzman.
Stephen Schwarzman, co-founder and chief executive officer of Blackstone Group LP, speaks during a Business Roundtable CEO Innovation Summit discussion in Washington, D.C., U.S., on Thursday, Dec. 6, 2018. The summit features discussions with Americas top chief executive officers, government leaders and industry experts on ideas and policies. Photographer: Andrew Harrer/Bloomberg

Blackstone has epitomized the industry’s fundraising muscle. The New York-based company also reported Thursday that its assets under management crossed half a trillion, to $512 billion, for the first time.

KKR and Ares Management announced conversion plans last year following the passage of a U.S. tax law, which cut the corporate rate to 21% from 35%. The switch makes it possible for these firms to be included in indexes, which could potentially boost stock valuations and win more mutual fund and ETF investors. It also eliminates the need for investors to file cumbersome K-1 tax forms.

KKR’s stock initially outperformed its biggest rivals after its May 2018 announcement that it was converting to a C-corp. Shares of Blackstone popped toward the end of last year and have beat KKR since revealing its conversion plans through Wednesday.

Blackstone’s stock price has risen about 21% this year. The shares jumped about 7% in early trading Thursday.

Still, inclusion in indexes isn’t guaranteed because there is some subjectivity in the decision, said Gerald O’Hara, an analyst at Jefferies. “You can check all the boxes, but still not get included,” he said.

Blackstone said it expects the conversion to be effective as of July 1.

Bloomberg News