I had a pretty involved Twitter conversation with TED today on the implications of the fact that fewer companies are going public. We’re both agreed that from a corporate-finance perspective, the trend makes perfect sense: the all-in cost of private equity is lower than the cost of going public. (For reasons why that might be the case, see here or here for starters.) But broadly speaking, from a public-policy perspective, is this a good thing or a bad thing? My thesis is that it’s a bad thing.
The LBO of Hilton hotels made no sense even at the time: I described it as crazy, adding that the lenders (including Bear Stearns, bless ‘em) were “taking equity-like risk” for pretty modest returns. So it comes as no surprise to learn that Blackstone, the buyer, has not only written down its investment by half, but is also looking to restructure Hilton’s debt.