A mere three years after its red herring slammed into the global financial crisis, Apollo Global Management LLC pulled off its $565 million initial public offering without a hitch. Well, almost.

Apollo, named after the Greek sun god, is now one of four private equity businesses exposed to the harsh light of the public markets. Led by Leon Black after he left the imploding junk bond shop Drexel, Burnham Lambert Inc., it got its start in 1990 with vulture investing and leveraged buyouts. The firm has since grown to $67.6 billion in assets under management and an array of investment vehicles in real estate and capital markets.

Its move onto the New York Stock Exchange March 30 surmounted global uncertainties and choppy capital markets and sparked speculation about which large LBO house is next. But Apollo's lackluster debut -- it opened 5% below the IPO price -- may give others pause.

On the face of it, the timing may be opportune. This year is shaping up to be a banner one for private equity, with generally robust debt markets and record IPOs by PE-backed companies. Apollo's recent funds have also performed better than those of its peers. Its 2008 fund is trumpeting a 46% internal rate of return so far. Yet the experience -- even inexperience -- to date with other public private equity stocks appeared to weigh negatively on investor sentiment for Apollo.

First a brief recap: New York investment firm Fortress Investment Group LLC paved the way in February 2007 with a $634 million IPO (excluding the insiders' share sale before the event). Fortress, which has always had a large hedge fund business alongside private equity funds, now has $44.6 billion in assets under management, $16.7 billion of which is considered private equity.

But it was Blackstone Group LP's $7.1 billion IPO later that year, valuing the firm at a staggering $38 billion, that knocked everyone's socks off. Rivals Kohlberg Kravis Roberts & Co. LP and Apollo were scurrying to catch up on the filings. Apollo signaled its intent in August 2007 when it first signed up to sell shares to private investors through Goldman, Sachs & Co.'s new private exchange GS Tradable Unregistered Equity OTC Market, known as GSTrUE. Then the markets headed south. Still, Apollo forged ahead with an S-1 filing in April 2008.

It wasn't until October 2009 that KKR dipped cautiously into the public markets through a reverse merger with its Euronext-listed investment fund KKR Private Equity Investors, launched in 2005. By November 2009 Apollo appeared to be headed toward an IPO.

Yet in some respects it wasn't ready: Apollo had no in-house public relations team or even a website at the time; three Apollo funds were posting double-digit declines; and controversy was building up over pay-to-play investigations involving former executives of the California Public Employees' Retirement System and Apollo. Apollo was never charged with any wrongdoing.

KKR moved its shares to the New York Stock Exchange in July 2010. Apollo continued to file amended prospectuses -- eight in total -- before it finally began trading March 30. Blackstone's and Fortress' stocks were hammered during the crisis, and their stocks have yet to recover fully, though both Blackstone's and KKR's stocks were up 47% and 56%, respectively, in the six months leading up to Apollo's IPO.

In terms of valuation, Apollo falls below Blackstone and KKR. Blackstone trades at 15.3 times its 2010 economic net income, or ENI, a public PE firm's preferred method of representing earnings, while KKR trades at 5.6 times its 2010 numbers. Apollo boasts a market capitalization of just 4.8 times ENI.

The difference may be attributed to the makeup of their respective businesses. Even though Apollo has more assets under management than KKR's $61 billion, KKR has more exposure to private equity, which accounts for 83% of its fee-generating assets under management, versus Apollo's 59%. Blackstone has just 22% of its fee-generating funds tied up in PE. (See related story, here.)

Having a listed stock grants PE firms liquidity for management and other early investors, as well as currency to support acquisitions and attract new employees.

But analysts say it's not the same as participating in a private equity fund, and in many other respects, it puts retail investors at a disadvantage relative to limited partners. Alternative asset managers "tend to report data that either clouds investor perception or provides only the barest level of detail into their operations," Chicago research company Morningstar Inc. said in a March 29 note before Apollo's public debut.

Moreover, Apollo principals also have almost complete control, including over the makeup of the board, it said. Apollo managing directors led by Black, Joshua Harris and Marc Rowan have 80.7% of the voting power and 58.9% of the economic stake following the IPO.

Still subject to debate is the question of how the Apollo underwriters got sufficient demand to sell 14% more shares than they had planned a week earlier and then priced it at the high end of the given range, only to have the stock immediately fall 5% at the opening.

Pricing at $19, on the high end of its target $17 to $19 per share range, Apollo wound up with $21.5 million more than it would have at $18, netting proceeds of $376 million after fees.

David Menlow, president of IPO Financial Network, an independent IPO research firm, believes underwriters intentionally sold the stock high. They did this because of the relationship they had with Apollo, among other reasons, he says, but it left buyers in the lurch. IPOfn gave Apollo a low hold rating, just above sell, expecting it would open at a slight premium.

Menlow explains that $19 was at the midpoint of the widely reported target range of $18 to $20 a share, which was unconfirmed by Apollo, just a week before Apollo registered the price range.

"It created a false appearance that the deal was in demand," he says. "This was strictly an issue of the underwriters doing what they wanted, which was to get maximum dollars available to the sell side of the equation," says Menlow, who singles out lead underwriter Goldman Sachs.

Goldman, J.P. Morgan Securities LLC and Credit­ Suisse Group had acquired Class A shares in August 2007 through a private placement on the GSTrUE. For the IPO, Goldman was joined by J.P. Morgan and Bank of America Merrill Lynch as lead managers, with additional underwriting by Citigroup Inc., Credit Suisse, Deutsche Bank Securities Inc. and UBS Investment Bank.

Goldman Sachs declined to provide any comment after repeated requests. All other underwriters either cited a quiet period or did not respond to calls for comment.

"There's always a difficulty for underwriters in trying to appease the company that's employed them and trying to appease public investors," says IPO research analyst Nick Einhorn at Renaissance Capital LLC.

Boston College finance professor Thomas Chemmanur described in a recent study the role played by incentives in how underwriters price an IPO.

"Underwriters have a short-term incentive to sell the equity of firms they take public at a price higher than their intrinsic value," writes Chemmanur. "However, underwriters have a reputation at stake with investors, mitigating this moral hazard problem in information production."

In the case of Apollo, however, incentives may be skewed. Apollo and other major PE firms are important investment banking clients, generating large amounts of fees every year. Also, Goldman was a shareholder, selling 2.68 million shares into the IPO.

Goldman, along with two hedge funds dumping their stakes collectively, pulled in $147.5 million in proceeds. "Goldman Sachs has more incentives than normal in trying to price the deal as high as possible," says Einhorn. "There's a lot of conflicts of interest."

Apollo's IPO may bode ill for future listings. "People ... believed that this was going to be the panacea for the entire alternative investment sector," Menlow concludes, but it "turned out to be nothing but Swiss cheese."