A class action law suit was filed yesterday against The Blackstone Group LP (NYSE: BX) "on behalf of its shareholders." The law suit was filed by Abraham, Fruchter & Twersky, LLP and it alleges that Blackstone failed to disclose the declining value of portfolio companies in the prospectus filed before the offering. Another suit also found its way to them as Coughlin Stoia Geller Rudman & Robbins LLP filed a class action suit against Blackstone.

Since its IPO, the stock has lost over half of its value. In the annual report filed in March, Blackstone wrote down $122 million on its investment in Financial Guaranty Insurance Company.

What is interesting from Blackstone is the disclosures and caveats in the various filings it has made. Some go on and on, while some other descriptions are vague or brief. What this boils down to more than anything is that suits like this get filed after shareholders lose money.

The company went public in June 2007 at a share price of $31.00 per share in an approximate $4.0 billion public offering. Since then, the stock has declined by over 50% to recent lows, although shares opened today at $17.85. The company hit a low of $13.40 in mid-March and has since recovered over $4.00 to its current trading level. The 52-week high is $38.00.

Today, shares are up almost 3%, on normal trading volume to $17.85. The suit(s) that have been filed and may still be filed might have had more of an emphasis a few weeks and few months ago. Since shares have recovered some 33% from the lows, this one might not get quite as much attention as class action suits against other public companies.

I've been bearish on The Blackstone Group (NYSE: BX) as a public company since before the IPO for two reason: 1) the IPO had all the hallmarks of a classic top of the market cashout for insiders, and 2) the company had poor corporate governance, leaving insider Stephen Schwarzman in what amounted to complete control of everything, with the shareholders at his mercy.

In The Wall Street Journal, George Anders reports (subscription required) on just how much of a corporate governance chamber pot Blackstone is: "Blackstone's top executives set their own pay, without the checks and balances -- sometimes perfunctory, sometimes real -- set up by other public companies."

Blackstone has no compensation committee, so partners Schwarzman and co-founder Peter Peterson make their own pay decisions.

Perhaps this explains how Schwarzman earned $350 million in 2007, in spite of the evaporation of more than $4 billion in market value since the company's IPO in June.

I know that a lot of investors are looking at Blackstone anew now that is dipped down to the $16 per share range. But without good corporate governance -- or any meaningful corporate governance -- I would still be skeptical about the company.

It's also disappointing that the New York Stock Exchange provides a market for companies that are run for their benefit of their insiders, not their shareholders.

Do we count private equity firms that wanted to go public as being dead deals? DealBook from New York Times ran a piece this morning wondering about the longstanding IPO shelf filing for private equity firm KKR.

We are still awaiting private equity firm KKR's initial public offering. The firm originally submitted its IPO paperwork to the S.E.C. in July, 2007. There has been no word since the last amendment in November.

This article notes that people are contemplating the delay: Are they waiting for the market to turn to better the price? Or are they considering a private placement? Time will tell.

There is another take on this from your truly. The Blackstone Group, L.P. (NYSE: BX) has already shown how private equity deals are much different and that the size of deals is far smaller. Their IPO has also lost more than half of its value from highs to lows. It's obvious KKR won't want to run the same gauntlet, at least not today.

After reaching an all-time low of $15.25 recently, shares of Blackstone (NYSE: BX) have staged a nice comeback. In today's trading, the stock price is up 6.71% to $17.0.2

So, are we seeing a turnaround in the buyout market? Not necessarily.

This week, there is a "Super Return" conference in Munich. Basically, it's a get-together for the big-wigs of private equity. And yes, Blackstone's chief operating officer, Hamilton James, is one of the attendees. Unfortunately, he has more bad news, according to a piece in Reuters.

That is, the debt markets have continued to deteriorate over the past month -- which will make it even more difficult to get deals done as well as work off the huge buyout debt backlog. His message is that the tough times will last at least until 2009.

Even so, James thinks there is still opportunity. Basically, with low prices on buyout debt, Blackstone can pick up some bargains. More importantly, the firm has billions in fresh capital to be opportunistic.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Stephen Schwarzman managed to make the Fortune "Man of the Moment " feature and end up on the Time 100. Last year he threw himself a famously excessive birthday bash as he turned 60 on Valentine's Day.

What a difference a year makes. Over the twelve months since his little party, Schwarzman has been the target of vicious attacks in the press. He recently told The New Yorker, "How does it feel? Unattractive. No thinking person wants to be reduced to a caricature."

But, Schwarzman has not been reduced. He has been "super-sized" in the way that people who brag about how much dough they have almost always are. The very wealthy in the US rarely talk about being filthy rich. They simply give their money away a la Bill Gates or Warren Buffett. No one knows the names of the great majority of people on the Forbes 400.

Schwarzman will have a more modest birthday party this year, according to press accounts. He may be saving money to give back to shareholders who invested in Blackstone (NYSE:BX) last year. The shares hit $38 after the IPO and now trade at under $18. About $4.5 billion in shareholder value has gone down the drain. He has also been a bit hard on shareholders at other companies. Blackstone backed out of a deal to buy Alliance Data (NYSE:ADS). Those shares moved from $81 to under $56. That's another $3 billion in shareholder money gone.

Instead of whining to the press about being stomped on by people who have lost money investing in Blackstone or Blackstone-related deals, perhaps he should get a wig and sunglasses so that he can walk around unnoticed, like Greta Garbo did.

Douglas A. McIntyre is an editor at 247wallst.com.

A piece in this week's issue of Barron's look at (subscription required) The Blackstone Group (NYSE: BX), wondering whether the stock that has performed brutally since its IPO might at last be worth a look.

The company is trading under $18.50, down from a post-IPO high of $38 reached in June, and sports a dividend yield of around 6.5%.

But Barron's warns investors that they could be in for a surprise: "Few shareholders are aware of Blackstone funds' "claw back" feature, requiring the company to refund to investors already-booked incentive fees if subsequent investments suffer. Claw backs are common in private equity, but rare among traditional asset managers and hedge funds. They protect investors from paying big fees and then getting disappointing returns."

Problems in the credit markets and a lackluster economic outlook could trigger clawbacks, and some of Blackstone's past earnings could evaporate in a wave of charges. That would definitely be bad news for anyone buying the stock at its current levels.

I'll be staying away from Blackstone for a different reason entirely: at the time of the IPO, I thought that it was a cynical effort by chairman and CEO Stephen Schwarzman to cash in some of his chips at the top of what he saw was a bubble. Add in concerns about the company's accounting, and this is just not a company that I find myself completely trusting.

And if I can't trust the management, I'm not going to touch the stock.

The Wall Street Journal looks at a key reason many investment banks may be unwilling to "lock horns" with The Blackstone Group (NYSE: BX) over financing for its previously announced deals: the firm generates more investment banking business than any other firm -- $646 million in fees in 2007 alone -- and it's just not worth alienating Stephen Schwarzman to save investors some money in the short-term.

This got me thinking about something: were those investment banking fees influencing the Wall Street analysts who called Blackstone a buy at its IPO, even when most in the financial press, including several of us here at BloggingBuyouts, were trashing the offering as a cash-out effort by the firm's avaricious CEO?

One indication of possible bias on the part of analysts may be the divergence between the ratings given by sell-side analysts versus independent research analysts.

Thomson/First Call reports that nine analysts cover Blackstone: 4 strong buys, 4 buys, and 1 hold.

Jaywalk Consensus polled 6 independent analysts -- "professional firms that attest to having no investment banking or other potential conflicts that might impact the integrity of their research" -- and found 1 strong buy, 1 buy, and 4 holds.

In light of the huge investment banking fees Blackstone generates and the discrepancy between independent analysts and traditional sell-siders, a cynical person might conclude that the integrity of Wall Street research is still compromised, in spite of the high-profile slaps on the wrist handed to investment banking whores like Henry Blodget.

The chart to the right shows the performance of Stephen Schwarzman's Blackstone Group (NYSE: BX) since its IPO earlier this year. Just by looking at the stock price, you can tell that Mr. Schwarzman has some explaining to do.

At the time of the much-anticipated IPO, a lot of people, myself included, were warning investors to stay far, far away. It didn't appear that there was any reason for Blackstone to go public other than to allow insiders to cash in some of their chips at the absolute top of the private equity boom.

Of course, that's exactly what happened, and the IPO's poor performance has only added to Schwarzman's less than stellar reputation. In a recent speech covered by The New York Times, Schwarzman ran through all the traditional arguments about why private equity is good for the economy. He also added a somewhat bizarre twist, saying that the industry will help to mitigate the negative consequences of globalization.

Schwarzman can, and should, defend his industry all he wants. But the fact that he took the company public in what looked like a pretty self-serving money grab -- the IPO valued Schwarzman's stake at more than $7 billion -- will probably sully his reputation forever.

Bloomberg News reports that Blackstone Group (NYSE: BX) missed its profit forecast and it's stock is likely to open 29% below its $31 a share IPO price. The culprit was a 44% drop to $109.1 million in Blackstone's real estate revenue -- it is blaming subprime for a decline in its commercial real estate lending.

In August 2006, I began to post on the idea that private equity was peaking. And I got into an interesting debate on the topic on CNBC this February. So today's announcement on Blackstone's earnings miss does not come as a huge surprise. Blackstone missed analyst's estimates by nine cents a share -- profit excluding some compensation costs dropped to $234 million from $239.1 million in 2006. On that basis, profit was 21 cents a share -- 9 cents below analysts' 30 cent average estimate.

There was some good news though. Revenue in the corporate private-equity segment jumped 42% to $227.3 million on higher fees. Revenue in the alternative asset-management segment, built on hedge funds, surged 88% to $124.9 million with more fee-earning assets under management. Financial advisory revenue went up 60% to $84.3 million.

Chinese investors feel that they got burned when they took a stake in big private equity firm Blackstone (NYSE: BX). That IPO did not do well, so the disappointment is understandable.

But, the Chinese may be back. According to a report in the FT, the China Social Security fund, which manages over $62 billion in assets, has its eyes on KKR, Carlyle, and TPG. The fund is interested in a stake of 9.9% in at least one of the companies. The British newspaper quoted one analyst on the potential investment: "'China's interest in buying into overseas financial intermediaries is clearly part of a deliberate strategy,' said Isaac Meng, an analyst with BNP Paribas in Beijing. 'The government is hoping to do a better job in exporting its capital than the Japanese did in the 1980s.'"

That may all be well and good, but members of the US Congress are already concerned about the investment of China's Citic Securities in Bear Stearns (NYSE: BSC). It is unclear how such an investment would compromise US interests, but Congress could try to block these deals on the grounds that large investment and LBO firms control a huge portion of the investment capital in the US. They would not want any Chinese influence in the process.

The Congressional posturing on the matter is a red herring, but meddling by the federal government could simply make the Chinese wary of moving capital into the US. But, if Congress leaves the matter along, Wall Street firms are likely to have Chinese shareholders.

Douglas A. McIntyre is an editor at 247wallst.com.

It was certainly nice that Blackstone (NYSE: BX) had a strong Q2 with net income jumping from $224 million last year to $774 million. The stock is up over 7% in the pre-market.

The company's June IPO was highly anticipated and was viewed as a proxy for the health and financial success of private equity firms. It bombed. Shares fell from $38 to under $23 in less than two months.

But, the second quarter is not the number that bears watching. It was undoubtedly a success, but it came ahead of the credit crisis that has sucked financing for big LBO and private equity deals out of the market. Analysts are worried that the disappearance of liquidity in that buyout market could hurt the results of large financial institutions like Goldman Sachs (NYSE: GS) and Citigroup (NYSE: C).

Based on early trading, Blackstone's shares may make it back to $28 today, but to move back toward $38, the firm will have to prove that it can turn in another big quarter in a very bad environment.

Douglas A. McIntyre is a partner at 24/7 Wall St.

As I posted in June, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

The New York Times [registration required] reports that China is not happy its investment in Blackstone (NYSE: BX). Since Blackstone's June 22 IPO, China's $3 billion stake has lost $425 million worth of its value, or 14%.

We may look back on China's investment in Blackstone as a watershed event. Back in the 1980s many Americans were up in arms about the 1989 purchase of Rockefeller Center by a Japanese company -- Mitsubishi Estates Co. That money-losing investment marked the turning point in a decades-long decline in Japan's global ascendancy. While China's Blackstone investment did not cause much uproar here, it may have marked the private equity peak just as the Mitsubishi investment marked a peak in both Japan and New York real estate.

Ok, if you bought shares of The Blackstone Group LP (NYSE: BX) for $38, you probably don't like the firm's leader, Stephen Schwarzman. Or, if you pay ordinary tax rates, you probably have some distaste. Oh, what if you got a pink slip from a company that Blackstone purchased?

I think it's a good bet that Schwarzman's popularity rating is dicey.

Yet, in the deal world, he should be in the Hall of Fame. In fact, in this Sunday's NY Times, Andrew Ross Sorkin has a piece that defends the controversial financier.

According to Sorkin, he thinks it was inevitable that we would learn about the shadowy world of private equity. So why not now?

What's more, Sorkin says that Schwarzman is not the only dealmaker who likes to spend money on luxury and parties. For example, he points to TPG's David Bonderman, who hired the the Rolling Stones for his birthday bash.

Of course, Schwarzman was smart enough to realize that there was a big opportunity to take lots of money off the table – and, as a result, make it more difficult for his competitors to do the same.

More importantly, Schwarzman has assembled a top-notch team and racked up stellar returns.

Basically, he is no different from any other top financier, which is probably why he has lots and lots of detractors.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Negative sentiment from earlier posts today by Zac Bissonnette and Peter Cohan towards private equity can also be detected in this week's Economist, in different ways. Zac's post discussed the negativity displayed in the Moody's report, which discussed the firm's belief that private equity firms don't have a long-term time horizon when making investments. Peter's post opined on the Moody's report and referenced an older post he wrote with points that are still very relevant today. For example, the fact that money seems to be flowing in PE funds at a rate that can't be maintained much longer. I recommend readers check out both Peter's and Zac's posts.

Still more bashing? Well, yes. In this week's Economist, the "Leaders" section AND "Briefing" section joined in on the bashing.