Reuters pointed out in June that some unusual terms in Blackstone’s IPO filing may complicate the company’s profitability for potential investors. 
    
Shareholders who missed that article may have figured that out themselves on Monday, when Blackstone reported a quarterly net loss of $113.2 million, or 44 cents a share — but an “economic net income,” after taxes, $234 million, or 21 cents a share.  That was flat from the year earlier period. Nevertheless, shares dropped 8 percent.

So who to trust? On a generally accepted accounting principles basis, Blackstone posted a net loss of $113.2 million, or 44 cents a share. That compares with net income of $372.5 million a year earlier. Those results include charges related to compensation. Anyway you cut it, the GAAP number isn’t pretty, nor is it necessarily a reflection of the earnings.

And that’s Blackstone’s point. Why focus on ENI and not regular old earnings? Because, as stated in Blackstone’s filings, the bulk of what the firm raised in its IPO is going to payout employees, including $2.3 billion to co-founders Schwarzman and Peterson alone.

To make matters more confusing, Bank of America analyst Michael Hecht prefers to look at neither GAAP earnings, nor ENI to judge Blackstone’s quarterly performance. In a research note on Monday, Hecht uses adjusted cash flow from operations, which at 29 cents a share last quarter was only a penny below the Street. As DealZone has pointed out, Blackstone’s IR head used to run BofA’s equity research group.

Blackstone is sticking to its ENI, which is net income excluding income taxes, noncash charges related to vesting of equity-based compensation and amortization of intangible assets. 

Monday’s loss included $802.6 million of non-cash charges associated with compensation arising from IPO unit awards and the amortization of intangibles, Blackstone said. 
 
ENI is not a common metric. DealZone noted in June that ENI was only used by one other major publicly traded company in the past year (Southwest Airlines). But Blackstone is not your average company, as it generates cash through a half dozen investment funds allocating capital across the globe. 

On the surface, earnings didn’t look so bad, with three of its four major groups posting gains in revenue. But that’s not what the market saw. It may be a while before investors understand the whole ENI thing.  

(Photo. Blackstone President Hamilton James. Reuters file).