Blackstone Chief Schwarzman: Private Assets Valuations Too High, Bubble-like

September 26, 2019 | News, Private Equity

Schwarzman warned that late-stage investors in private tech companies such as WeWork could be left holding the bag and suffer losses.

Stephen Schwarzman, the co-founder, chairman, and CEO of the Blackstone Group, said Dot.com like conditions prevailed in the startup industry.

He said asset valuations had reached bubble-like proportions and that there could be a painful reckoning of losses from investing in companies such as Uber and WeWork.

Schwarzman: Dangerous market patterns

Fear of missing out (FOMO) had sucked in investors into late-stage funding rounds of fast-growing but unprofitable tech ventures. These funding rounds set up escalated valuations of the companies, who were usually planning IPOs.

“That’s the greatest risk,” Schwarzman said. “These valuations of private tech companies are most probably too high.”

Blackstone’s eighth buyout fund scoops $26B in commitments

To Blackstone goes the credit for raising the largest buyout fund ever. The firm’s eighth series garnered $26 billion and still hasn’t closed.

Schwarzman gave the credit for the milestone to Joe Baratta, the global head of private equity. He was writing in his book “What It Takes.” The book published last week.

Adverse publicity against private equity is mostly incorrect

Recent broadsides issued against the private equity industry by political individuals were not factual. Schwarzman said that usually, a buyout firm invested money in acquisitions to improve their growth prospects and profitability. That often boosted employment. In Blackstone’s case, its portfolio companies had generated about 100,000 jobs during the last ten years.

He also pointed out that the private equity industry had invested $3 trillion over the last five years on behalf of life insurers and pension funds. Private equity had made a singular contribution to the US retirement system through the successful management of these assets.

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