Sunday, May 31, 2015

Dr. Dre may be "first billionaire in hip-hop"

The in-studio video posted Thursday on actor Tyrese Gibson's Facebook page is raucous and choppy, a party scene with a mix of explicit language, big laughs and nimble dance moves.

But its message is unmistakable, delivered by Dr. Dre himself: "The first billionaire in hip-hop, right here from the (expletive deleted) West Coast."

With that line, spoken just over camera-wielding Gibson's right shoulder, Dr. Dre appeared to both confirm rumors of Apple's imminent acquisition of Beats Electronics and announce a landmark moment in hip-hop history.

Will Dre, who rose to prominence in the 1980s as a fierce Los Angeles-based rapper with the controversial group N.W.A, indeed become the street-bred genre's first billionaire? Odds are yes.

Although his stake in the company that bears his name has never been made public, "most feel he's got between 20% and 25% of it," says Chuck Creekmur, CEO AllHipHip.com. "That would mean he'd get there first, before Diddy and Jay-Z."

Dre ranked second in Forbes magazine's most recent list of top-earning rappers, at $550 million. P. Diddy was first with $700 million and Jay-Z third at $520. If the Apple purchase price of $3.2 billion for Beats' suite of headphones and electronics goods as well as its recently launched streaming music service proves accurate, that could put Dre's stake of Beats at around $800 million.

To see a guy many of us grew up with make it this big is really going to inspire others.

Chuck Creekmur, CEO AllHipHop.com

Dre breaking that billion-dollar barrier will have a huge impact on the hip-hop community, says Creekmur.

"Hip-hop is a very aspirational culture, and many of the people in it certainly aspire to become as affluent as the American dream says you can be, even though it's eluded most of us," he says. "Most of the people in hip-hop are first generation business people, so to see a guy many of us grew up with make it this big is really going to inspire others to push to do the same."

Making the mome! nt even more powerful is the fact that, when compared to Diddy and Jay-Z, Dre has long preferred to stay in the background, cultivating not so much a celebrity vibe as a reputation for being among one of the best producers in the music business with a set of ears second to none.

In fact, Creekmur says the video with Gibson, which was soon pulled off the actor's Facebook page, represents "a real exception to his normal reclusive M.O.," perhaps attributable, per Gibson's crack on the 80-second clip, to the group having consumed a few beers.

For many in the hip-hop community, Dre will first and foremost be synonymous with crushing beats and not business deals.

"Regardless of the success of this deal, the legacy Dre has built as a musician and producer will never be undercut," says Jermaine Hall, editor of Vibe magazine. "It's like Magic Johnson. He may have gone on to be a great businessman, but he'll always be the face of the Lakers franchise."

Hall says Dre's magic lies in having "ears that tell him exactly where the bass and treble should be at" for a given song, ears that have also been used to tune the Beats line of headphones with a decidedly bass-heavy bent.

"You combine that with the savvy and marketing of (Beats' other founding force, producer) Jimmy Iovine and you were bound to get a winner," says Hall, who adds that Apple would be making a mistake if it rebranded its Beats purchase. Beats accounts for around two-thirds of the premium headphone market, where products sell for anywhere from $200 to $400 a pair.

In the end, the deal may have cultural repercussions that equal its fiscal ones.

"When you step back, for someone from the hip-hop culture to reach the billion-dollar mark is pretty incredible," says Hall. "And in many ways, Dre getting there first before those other two guys is the better story. He's the common man behind the scenes, and he won."

Thursday, May 28, 2015

Blackstone Discusses Fannie and Freddie Stake

NEW YORK (TheStreet) -- Blackstone Group  (BX) President and COO Hamilton "Tony" James confirmed the company's preferred equity stake in Fannie Mae  (FNMA) and Freddie Mac  (FMCC) but said he does not believe the asset management giant will drive the debate over the future of the government sponsored enterprises (GSEs).

"I honestly don't think we are going to be the mover and shaker on this," James told TheStreet during a press conference following the company's first quarter earnings release Wednesday. He added the firm does not have so large a position it will be a make or break player in the debate.

"We think we have a plan that makes a lot of sense in terms of getting the GSEs out of being a liability for the government," James said.

James did not elaborate on the plan, though in a follow up email exchange a Blackstone spokesman said the company's plan is distinct from a proposal floated by Fairholme Capital in November that Blackstone was reported to be behind.

"We have our own plan but do not want to comment on details," wrote spokesman Peter Rose.

It seems unlikely government officials would be receptive to any plan backed by private investors, something James, who is friendly with many at the highest levels of government in both major parties, knows better than anyone.

"Clearly this is going to be a highly political process," he said.

GSE reform legislation proposed by Sens. Tim Johnson (D, SD) and Mike Crapo (R., ID) effectively ignores current shareholders, which in addition to Blackstone include high profile investors such as Perry Capital, Fairholme Funds and Pershing Square Capital among many others, as well as consumer advocate Ralph Nader.

It also codifies the Treasury Department's controversial 2012 amendment to the 2008 conservatorship of Fannie and Freddie. The amendment changed the terms of Fannie and Freddie's debt to the government. Instead of owing the Treasury an annual 10% dividend, the GSEs suddenly owed the Treasury all of their profits for an indefinite period, aside from minimal capital buffers. That amendment -- also known as the "net worth sweep" -- is at the crux of many of the roughly 20 lawsuits brought against the government by GSE shareholders. The lawsuits taking issue with the sweep contend it violates the Fifth Amendment of the U.S. constitution's prohibition of the taking of private property for public use without just compensation. Blackstone is not a party to any of the lawsuits, though it will benefit if they succeed. GSO Capital Partners, a unit of Blackstone, commissioned a liquidation analysis of Fannie and Freddie by restructuring firm Alvarez & Marsal. The report, published last month, projected the mortgage giants would be worth about $170 billion combined if they were wound down.

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Stock quotes in this article: FNMA, FMCC, BX