Apollo Global shares fall in NYSE debut

NEW YORK Wed Mar 30, 2011 4:46pm EDT

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NEW YORK (Reuters) - The shares of private equity firm Apollo Global Management LLC (APO.N) fell in their debut on the New York Stock Exchange on Wednesday, dampening the prospects for other alternative asset managers potentially looking to go public.

Apollo, which was founded by former Drexel Burnham Lambert banker Leon Black in 1990, follows private equity firms Blackstone Group LP (BX.N) and KKR and Co LP (KKR.N) in going public and sector analysts say investors may also see Apollo as less diversified than its bigger rival -- and therefore riskier.

"For Apollo and KKR both, their fortunes are tied directly to the state of the private equity market," said Greg Warren, a Morningstar senior stock analyst who follows Blackstone, adding that private equity is "somewhat hamstrung from the heydays."

Apollo's $565 million IPO was also seen as setting the tone for others such as Carlyle Group CYL.UL and Oaktree Capital Management OAKCP.UL, which could pursue their own IPOs.

Apollo's shares fell 4.2 percent, finishing the first day of trading at $18.20, below the $19 IPO price.

This is in contrast to the positive signal Apollo was seen as sending to its peer IPO hopefuls on Tuesday, when it sold more shares than planned and priced them the top of the proposed range.

"Now investors really are going to turn an icy shoulder to any other private equity firm that comes to the marketplace," said David Menlow, president of IPOfinancial.com.

"They may have priced at the top and (sold more shares), but it's the performance of the stock that's going to call the shots" for other IPOs in the sector.

Along with a number of other firms and hedge funds, Apollo missed the first great wave of private equity firms going public starting in 2007, just before the firm first filed with U.S. regulators to list shares on a public stock exchange.

A source previously told Reuters Carlyle may file IPO papers later this year, while other sources have said bankers are holding discussions with Oaktree about going public.

VALUATION COMPARISON

Apollo, valued at nearly $7 billion by the IPO, is dwarfed by KKR which has a market capitalization of nearly $12 billion and Blackstone which is valued at about $21 billion.

Blackstone trades at nearly 15 times its 2010 economic net income and KKR trades at about six times its 2010 numbers, according to Reuters calculations.

Apollo's IPO priced it at about 5.8 times its 2010 adjusted economic net income, according to Reuters calculations.

Blackstone shares slipped 1.6 percent to $18.10, while KKR shares fell 3.4 percent to $16.82. They have risen 28 percent and 18 percent, respectively, this year.

"(Blackstone) is bigger, more diversified, they are in other businesses that the other two aren't," said one financial analyst who asked not to be quoted.

"For Apollo more specifically, given their investment approach, it seems their prospects for deal flow seemingly are not as compelling as a KKR or a Blackstone."

Apollo has assets under management of $67.6 billion, which include investments in companies such as real estate company Realogy and casino operator Caesars Entertainment, which canceled IPO in November, citing difficult market conditions.

Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Bank of America Merrill Lynch (BAC.N) led the underwriters on the Apollo IPO.

(Reporting by Alina Selyukh and Megan Davies; editing by Dave Zimmerman, Tim Dobbyn and Andre Grenon)

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