Tax woes drag on Blackstone

By Emily Chasan

NEW YORK (Reuters) - Blackstone Group LP's (BX.N: Quote, Profile, Research, Stock Buzz) initial public offering raised billions of dollars for its employees, but the private equity firm's shares might have performed even better if it weren't for the potential tax headaches, analysts said on Friday.

The company's shares rose 13 percent on their first day of trading on Friday, which is respectable for most IPOs, but paltry for a company as widely hyped as Blackstone.

The $4.13 billion offering was the largest U.S. IPO in five years and the eighth-biggest by a U.S. company ever, excluding overallotments.

Investors are likely concerned about Blackstone's master limited partnership status, which qualifies it for hefty tax breaks, analysts said.

Senators last week introduced bipartisan legislation that would sharply raise taxes for private equity firms that go public. Democrats in the U.S. House of Representatives introduced a similar bill on Friday.

Some investors had expected Blackstone to repeat the performance of Fortress Investment Group (FIG.N: Quote, Profile, Research, Stock Buzz), an alternative investment company also structured as a partnership, whose shares rose 68 percent on their first day of trading in February.

But concerns about rising taxes make Blackstone a little harder to swallow.

If the congressional bill is passed Blackstone's maximum federal tax rate could go from 15 percent to the standard corporate rate of 35 percent, and cut into its profits.