Shares of Blackstone Group (NYSE:BX) gained 17.4% in the month of June, according to S&P Global Market Intelligence, as the world's largest alternative asset manager changed its corporate structure, to Wall Street's delight.
Blackstone was also helped by a big June market rebound from a May stock market swoon. As an asset manager, Blackstone earns incentive fees when it sells assets, which usually fetch good prices when the stock market climbs. Consequently, Blackstone usually moves up or down with the market, though the company makes some of its best investments during times of market stress.
However, Blackstone's outsize June gain versus the broader market was likely due to the timing of its corporate status change.
On its first-quarter conference call in April, CEO Steve Schwartzman conveyed Blackstone would be converting from a partnership to a C-corp, the more common form of publicly traded stock. As a result, Blackstone will pay higher corporate taxes, though not nearly as much as it would have paid before the Tax Cuts and Jobs Act of 2017. Counteracting that, most shareholders will pay a lower tax on qualified dividends than on previous distributions.
However, the biggest reason for the change was so that index and mutual funds will now be able to trade Blackstone's stock. Before, these large investment pools couldn't own Blackstone due to its partnership status and the headaches of K-1 tax forms. Management had long blamed the stock's partnership status for Blackstone's persistently low stock price.
Though the transition just happened on the July 1, investors were clearly anticipating good things post-transition, as they piled in during the month leading up to it. So, it's no surprise Blackstone's stock rose in June.
Now trading at 19 times earnings, Blackstone isn't the bargain it was in April, but it's still the largest and probably highest-quality alternative asset manager in the market. Though any given year may be feast or famine depending on the timing of dispositions, I expect Blackstone to do well over the long term.