Wednesday, 20 August 2014
Last updated 28 min ago
Oct 1 2013 | 10:27am ET
In retrospect, Blackstone Group CEO Stephen Schwarzman thinks it was a bad idea to sell the business that became BlackRock—and the world's largest money manager.
Blackstone sold its 35% stake in the future BlackRock 19 years ago amidst a dispute between Schwarzman and the head of the then-Blackstone Financial Management, Laurence Fink. The deal netted Blackstone $240 million; a 35% stake in BlackRock is now worth more than $16 billion. Schwarzman himself took home $25 million 19 years ago; today his 9% stake would be worth more than $4 billion.
"That was certainly a heroic mistake," Schwarzman told Arthur Levitt on Bloomberg Radio, in an interview that will air on Sunday. "We all stumble on and have some success. But it's a humbling experience to see what you don't do right."
Blackstone created what became BlackRock in 1988, providing Fink and his First Boston Corp. team a $5 million credit line in exchange for a 50% stake in the new mortgage-securities unit. But as the group continued to grow, with assets hitting $2.7 billion in less than a year, Fink continued to award shares to new hires, diluting Blackstone's stake to 35% by 1992.
Schwarzman objected to further reducing Blackstone's stake, and eventually gave in to Fink's demands that he sell it. PNC Bank bought Blackstone's stake in June 1994.
BlackRock now manages $3.86 trillion and is worth $46 billion. Blackstone manages just $230 million and has a market capitalization of $28 billion.
Aug 4 2014 | 7:42am ET
By now, U.S. and international subscribers have received their home or office delivery of the special 500th issue of Futures magazine. You can too!—a very special offer follows. The issue is the largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders. Read more…
The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.
The Alpha Pages Editor's Note