What does “economic net income” mean to you?

Blackstone Group on August 6 reported that it achieved $99.9M worth of ENI during the second quarter. That’s a lot better than the $93.6M “economic net loss” of a year ago.

Though Blackstone devotes three pages of its 16-page release to explain ENI, I still don’t get it. An e-mail sent to Joan Solotar, BG’s IR contact, went unreturned. Reuters helpfully explains that ENI “excludes income tax and lavish equity-based compensation fees as well as the decline in the awarded stock’s value.”

Blackstone CEO Stephen Schwarzman wants investors to focus on the ENI spin rather than the cold reality of net income Or to be more precise, net loss. Blackstone reported a $156.5M net loss during the second quarter. That compares to a $774.4M year ago profit. For the first half of `08, Blackstone lost a cool $407.5M vs. a $1.9B `07 profit. That’s a pretty substantial swing.

Blackstone shareholders must be a little uneasy with the company’s financial performance. The company went public last June in a much-anticipated IPO. Management deserves rave reviews for timing the transaction. The IPO, pegged right before the equity markets began some serious nose-diving, went off at $31 a-share. Blackstone now trades at $18.30 and dipped as low as $13.40 during the past year.

Schwarzman is downright bullish about the “slowing growth of world economies and volatile markets.” Blackstone is “sourcing an increasing number of attractive investment opportunities, some as a result of market dislocation,” said the CEO in the release.

The good news: there is more “economic net income” ahead. The bad news: Blackstone sees likely GAAP net losses for the next five years due to "significant compensation charges" among other things.

It may be some time before Blackstone gets to that $31 IPO price.

(Photo: Blackstone via Reuters blog)