Trump's tax overhaul allowed the publicly traded private equity firms to convert to corporations, fueling some $75 billion in stock market gains in 2019.
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“Sometimes there are things that are so undervalued it doesn’t make sense to me. Then sometimes they are so overvalued it also doesn’t make sense. But that’s the market, and people defend these anomalies as if they’re fair because it is the market,” Schwarzman says. Blackstone shares have returned 91% in 2019, reaching a record high market capitalization of $66 billion after Schwarzman restructured the firm from a tax-efficient partnership into a corporation, opening the firm’s shares to many index funds and mutual funds, who had been precluded from buying the stock previously.
As this era got going, just days before the failure of investment bank Bear Stearns in March 2008, Schwarzman decided to dial into his first earnings call as the head of a publicly traded company. Blackstone had listed its shares months before, and its stock quickly fell by half as competitors on Wall Street began revealing nine- and ten-figure trading losses, causing global markets to erupt in turmoil. Even then, Schwarzman could see how the contours of finance would be redrawn.
With the election of Donald Trump, however, came his signature piece of legislation late in 2017 that pushed through lower corporate tax rates from 35% to 21%. The cut was so drastic that firms like Blackstone could potentially trade their partnership tax rate for a corporate rate and only see their taxes rise modestly, two-to-five percentage points.
If things keep going the way they did this year, Wall Street might soon wake up to find Blackstone Group, a private equity firm with just 2,600 employees and founded in 1985, holding a larger market capitalization than Goldman Sachs, whose 36,000 employees just celebrated the 150th anniversary of the nation’s preeminent investment bank.
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