Was Blackstone correct in dealing with SeaWorld Entertainment Inc. (NYSE:SEAS)’s mishaps?

It has come to attention that a drop in shares by 32% in SeaWorld Entertainment Inc. (NYSE:SEAS) on Wednesday was due to the failed earnings report and its animal performer’s treatment.

Blackstone Group LP (BX) controlled SeaWorld (NYSE:SEAS) until April 2013 stock offering gives an excuse to come to terms with the current crop of the IPOs that privately owned equity backed businesses have performed worse than the new publicly owned companies.

IPOs that were previously bought for buyout shops are a key element of the issue market for the past few years. The top 20 privately owned IPOs that are equity backed from January 2013 seemed to earn an aggregate of $21 billion. The shares for the IPOs have increased by 25.3%, keeping in mind their initial offer price.

It can be compared to a gain of 15% of buying the fund of SPDR S&P 500 index (SPY) for all the 20 IPOs.

Winners have included Norwegian Cruise Line Holdings (NCLH), HD Supply Inc. (HDS), and Pinnacle Foods Inc. (PF) which were up 70%, 46% and 54% since January 2013, June 2013 and March 2013 respectively.

FTSE Renaissance IPO Composite Index states that IPOs have increased by twice compared to private equity IPOs which have risen to 62% from January 2013. Wall Street pointed out that the relative performance was better since 2010; however this has reversed since 2014.

SeaWorld (NYSE:SEAS) is currently the worst performer of the PE-backed issue. Michael’s Stores Inc. (MIK) Taylor Morrison Home Corp. (TMHC) has decreased to double digits this June. Coty Inc. (COTY) is also a poor performer as its shares are steady since June last year.

It makes sense that buyout targets will perform worse at this stage than all the initial offerings of the world in the stock market. They are well established companies that were acquired by corporate acquirers with a lot of debt. The public ones need more financial tuning plus high market valuations in order to return to public markets. Even though there are many share holders after IPO was held, but the best thing for them is to have an aggressive approach when it comes to setting an exit price that is full.

Companies have also been recapitalized with brand new debt that does not fund the business, yet finances its cash dividends to PE sponsors much before the IPO. After this, they are straightforward companies that are easily valued.

SeaWorld’s (NYSE:SEAS) stock had increased on its first day from $27 to $33.

The public interest in the theme park increased the shares to $30s in the month of July 2013. This was mainly due to the release of the movie “Blackfish”.

The financial interest of Blackstone in SeaWorld (NYSE:SEAS) decreased this spring as stock valuing $550 million with $33/share was sold. The stock went down to $18.90.

Blackstone was not acting out as this investment was handled in the proper way which shows how hazardous it is to provide bids when artists are trying to make their way into a market. It was merely seen as the proper move at the time for Blackstone.