Lehman and Blackstone’s similar stock price, market cap, and reliance on the real estate market (an illiquid market by its very nature). And it was liquidity that killed Lehman, not leverage. The cost of capital exceeded their ability to service the debt each day). But Lehman would have been fine if people were left to eat their losses. It was just $60 Bn market cap.
What cracked the market was contagion. The counterparties demanded higher value and more collateral to do business with each other.
Here is an article just starting to wargame the contagion of Blackstone to others.
BLACKSTONE’S $562 MILLION CMBS DEFAULT MAY SIGNAL RISKS FOR REAL ESTATE INVESTORS
INDRAJEET GIRAM·MARCH 3, 2023
WHAT WILL BE THE IMPACT OF BLACKSTONE’S MOVE ON THE ECONOMY?
Investors may become more cautious about investing in real estate or demand higher returns to compensate for the potential risks. This could lead to a slowdown in the industry and make it more challenging for firms to secure financing for their real estate projects.
Moreover, Blackstone’s default could also result in losing investor confidence in the company’s ability to manage its real estate investments effectively, leading to a decline in its market value.
In the long run, the default could prompt Blackstone and other firms to reconsider their investment strategies and risk management practices to minimize the potential impact of interest rate fluctuations on their real estate holdings.
BlackRock is also involved in various other businesses, including financial technology, risk management, and advisory services. The company operates in over 100 countries and has over 16,000 employees globally.
Good lord, why do financially illiterate post with such confidence? Lehman ran into liquidity issues because of leverage. When you are levered 50:1, it only takes a 2% loss to wipe you out. When you take a 10%+ loss, at 50x, you are more than wiped out, which was the case with Lehman, as to sell the assets at the new market value would mean instant bankruptcy and unable to pay its creditors and investors. They lost all liquidity because they couldn't sell ANYTHING
Blackstone is not going anywhere. They are one of the best capitalize companies on the planet and nearly every one of their real estate holdings is held solo (ie no contagon risk). That was not the case for Lehman at all.