Senate Puts Blackstone on Notice

Tax maneuver may derail IPO, transform private equity
By M. Morris,  Newser Staff
Posted Jun 15, 2007 12:48 PM CDT
Sen. Max Baucus, D-Mont., center, accompanied by Sen. Charles Schumer, D-N.Y., right, and Sen. Charles Grassley, R-Iowa, left, answer questions during a news conference on Capitol Hill in Washington,...   (Associated Press)
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(Newser) – Less than 2 weeks ahead of Blackstone's IPO, bipartisan legislation introduced in the Senate yesterday threatens to hamper or halt the avidly anticipated stock sale. The private equity behemoth's tax bill would more than double if the measure—under which partnerships like Blackstone would pay the 35% corporate rate rather than the 15% capital gains rate that currently applies—passes.

Although the higher rate would not apply to Blackstone for 5 years, the change would slash its market value, estimated pre-IPO at $32.4 billion; the New York Times estimates the drop at 15% to 20%. And the legislation would have huge implications for hedge funds as well as private equity operations, which are already under government and regulatory scrutiny.