Victor Fleischer is impressed by the structure of Blackstone’s IPO, noting that the firm is trying to retain capital gains treatment for most of its income. Doing so, Fleischer says, will entail walking a line between the ‘40 Act and IRC Sect. 7704:
“For the structure to work, then, what Blackstone does has to be active services for 40 Act purposes (we’re an asset management/advisory firm, not a pass-through who lets you invest in a pool of securities) but passive for tax purposes. I’m not saying the structure doesn’t work—quirks in the rules often allow this sort of regulatory arbitrage—just that it seems a little aggressive. I don’t think I’ve ever seen an entity go public with such uncertain tax treatment.”
The folks at Blackstone will probably be insulted that Fleischer thinks they are only “a little aggressive.”
The Conglomerate
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Blackstone’s S-1
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