Blackstone stock: Sell or hang on?

— -- A: When private-equity leader Blackstone went public in June, many investors saw the initial public offering (IPO) as their chance to be a Wall Street player.

While Blackstone has been successful investing in companies and has generated large returns for its customers, it was an exclusive club. Blackstone's investors include giant pools of money such as pension plans, endowments and foreign countries. Individual investors had no way to get a piece of Blackstone and take part in the private-equity and leveraged buyout boom.

When Blackstone sold shares to the public, IPO investors still couldn't buy into Blackstone's investment funds, but they could own shares of the investment company itself. It was an indirect way to get a piece of private equity. Some investors thought it was their ticket to riches.

But Blackstone's IPO will go down as another example of how Wall Street confounds the masses. Blackstone shares were priced at $31 a share and rose to $35.06 their first day of trading as eager individuals piled in. Then, fear of tax-law changes that could hurt Blackstone, plus rising evidence that private-equity firms may have trouble borrowing money to pay for deals, knocked the stock down to around $24. So much for easy riches.

If you bought Blackstone, now what? Assuming you paid $35 for the shares, you're probably already down more than 25%. Ask Matt readers know they should sell a stock if it falls 10% or more from the price they paid. That at least protects you from a catastrophic loss.

Unfortunately, your decision on Blackstone depends on the answers to some pretty confounding questions. If you believe debt markets will become receptive again to financing leveraged buyouts, the current correction in Blackstone shares is probably fleeting. But if you believe resistance to financing such deals will last a while, you might want to sell. If I knew the answer, I would tell you. It's a serious issue that could take weeks or longer to sort out.