Market Views: The Year of the IPO

Jon Gray, Blackstone President & COO: I’m Jon Gray. This is Market Views.
 
My economic weather report is more optimistic than the headlines. And part of it is the perspective I think we need. If you went back to 2020, we had COVID. Then we had Russia’s invasion of Ukraine. Last year we had Liberation Day. Now this war in the Middle East. And yet somehow in each of those previous conflicts, we got through it. And the U.S. Economy in particular has had a resilience and strength that people have underestimated. And I think 2026 will be the same story. I still think it’s the year of the IPO. You’re gonna have a couple of the largest tech companies in the world go public. That should obviously help the IPO market. We as a firm have nine companies on file right now, globally, and I think there’ll be strong receptivity.
 
Private credit is in the news all the time. I think what people are sort of conflating is returns that have come down as a result of base rates coming down, some spread tightening, and also maturities of portfolios, which leads to an increase in defaults, that’s led to some degradation of returns. But the leap to some sort of broad systemic problem for this lowly leveraged asset class just doesn’t make much sense (Figure: Leverage Utilized: GFC vs. Today)¹.

Not all software is created equal. You know, we saw this in the retail world where how Costco and Walmart have performed relative to, say, Toys R Us or Kmart over time. And so the same thing I think applies in software where you have companies that are deeply embedded systems of record, that ripping them out will be quite difficult. And so there’ll be different outcomes for those different types of players.
 
And then the final thing I’d say as it relates to private credit in software is that There’s a big difference between debt and equity. When you think about most of these loans, there’s probably a 60% cushion that the equity has put in. They’re the ones in that first-loss spot. The debt is senior. And so the enterprise value of the company has to fall very dramatically. So you’re in a more protected place (Figure: Illustrative Capital Structure).
 
We’ve made a strategic decision to try and be the biggest investor in AI infrastructure in the world. We are forecasting this year across our platforms that we will sign six gigawatts of leases for data centers. That’s about $100 billion of spend. The hyperscalers who will sign the leases will put in probably $200 billion of chips. That’s $300 billion of spend. I mean, these are massive things that are happening and we think it’s gonna make a big difference for our investors.

Notes:
Investment Banks 2007: Financial Markets regulation, GAO reports, published July 2009. Direct Lending Today: Blackstone Credit & Insurance views for typical direct lending vehicle.

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