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Carlyle Falls Below Offer Price as Rubenstein Plan Fails

Carlyle Shares Fall Below $22 IPO Price on Fifth Day of Trading
The building that houses the Carlyle Group LP headquarters stands in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

Carlyle Group LP sank below its $22 offering price in the fifth day of trading, following a discounted IPO with which the firm sought to prove that shares in private-equity managers can rise.

Carlyle, which had been trading in a range of 9 cents above its IPO price for the past three days, fell 1.1 percent to $21.75 at the close of trading in New York, after earlier falling as much as 4.4 percent to $21.02. The Standard & Poor’s 500 Index fell 0.7 percent.

In marketing the offering, David Rubenstein, Carlyle’s co-founder and co-chief executive officer, had told investors that the firm was pricing the shares at a discount so that they would rise, compared with the trading losses experienced by peers such as Blackstone Group LP and Apollo Global Management LLC. Carlyle’s offering price was below the proposed range of $23 to $25 a share.

Carlyle’s share price had been stuck just above $22 from May 3 through yesterday, as the S&P 500 slumped 2.8 percent in the same period. To traders such as Larry Peruzzi, that was a sign that the private-equity firm’s underwriters were shielding it from losses.

“The weak markets the last few days are helping to keep the stock from moving higher,” Peruzzi, senior equity trader at Cabrera Capital Markets LLC in Boston, said in an interview last week. “Hence an underwriter may be more willing to support a stock if they feel it is under pressure from macro and not micro factors.”

Carlyle’s Market Value

Randall Whitestone, a spokesman for Carlyle, declined to comment on the share price.

Carlyle sold about a 10 percent stake in the IPO, raising $671 million. The IPO valued Carlyle at $6.7 billion, or 7.6 times last year’s distributable earnings, according to data compiled by Bloomberg.

Blackstone, by comparison, has a market value of about $14.1 billion, or about 20 times its 2011 distributable earnings. The earnings measure largely reflects profits made from selling companies owned through buyout funds.

Alternative-asset managers have almost universally lost money for investors following initial public offerings. Blackstone, based in New York, has declined 59 percent since raising $4.75 billion in a 2007 IPO, and Apollo has tumbled 37 percent since its 2011 offering.

‘Long Term’ Efforts

Fortress Investment Group LLC and Och-Ziff Capital Management Group LLC, which held their own U.S. IPOs in 2007, have lost 81 percent and 74 percent. Oaktree Capital Group LLC has declined 3.6 percent since its IPO last month.

Rubenstein said in an e-mailed statement last week that he thinks the firm accomplished its objective in the IPO.

“Our principal focus in the offering was to attract a large number of highly respected institutional investors who support our emphasis on cash earnings and who will support our efforts to grow the firm over the long term,” Rubenstein said.

Carlyle is scheduled to report first-quarter earnings before U.S. markets open on May 15.

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