KKR co-CEO Henry Kravis. Photo by Drew Angerer/Getty Images.

Listed private equity firms are frustrated by what they view as artificially-low share prices, and are actively considering a structural fix: Converting from publicly-traded partnerships to C-corporations.

Why do it? Publicly-traded partnerships are off-limits for many institutional investors, and also aren't eligible for most equity indexes (like the S&P 500) or exchange-traded funds.

Why do it now? The corporate tax rate has moved closer to parity with capital gains, via the recent tax cuts. At 35%, conversion was a nonstarter.

Why not do it? There are still negative tax implications, and firms are trying to determine if they'd get enough stock price boost to offset. For example, KKR estimates that its 2017 after-tax economic net income would have been around 17% lower, calculated with the new tax rate. That means it would need to "see approximately two turns of multiple expansion, all else being equal, for a break-even stock price."

The conversion option was raised during several earnings calls in the past week — including for Apollo, Blackstone and Carlyle — but was brought into sharpest focus yesterday morning by KKR, which said it is "analyzing the potential impact of a conversion" and would likely have a final answer during its next earnings release.

Carlyle's Glenn Younkin added that converting is a "is a no-going-back kind of decision."

Go deeper

Over 73 million people watched the first debate on TV

Data: Nielsen; Chart: Andrew Witherspoon/Axios

More than 73.1 million people watched the first presidential debate on television on Monday night, according to Nielsen ratings.

Why it matters: While that's a sizable audience for any American TV program, it's down more than 13% from the record number of TV viewers who tuned in for the first debate of the 2016 election. The chaotic nature of the debate and the overall uncertainty around this year's election may have pushed some viewers away.

Senate passes bill funding government through December

Senate Majority Leader Mitch McConnell (R-Ky.) Photo: Chip Somodevilla/Getty Images

The Senate on Tuesday passed legislation to fund the federal government through Dec. 11, by a vote of 84-10.

Where it stands: The legislation will avert a government shutdown before funding expires Wednesday night and before the Nov. 3 election. The House passed the same measure last week by a vote of 359-57 after House Democrats and the Trump administration agreed on the resolution.

  • Both sides agreed early in negotiations that the bill should be a "clean" continuing resolution — meaning each party would only make small changes to existing funding levels so the measure would pass through both chambers quickly, Axios' Alayna Treene reported last week. The bill now goes to President Trump for signature.
Bryan Walsh, author of Future
59 mins ago - Technology

The age of engineering life begins

Illustration: Sarah Grillo/Axios

Synthetic biology startups raised some $3 billion through the first half of 2020, up from $1.9 billion for all of 2019, as the field brings the science of engineering to the art of life.

The big picture: Synthetic biologists are gradually learning how to program the code of life the way that computer experts have learned to program machines. If they can succeed — and if the public accepts their work — synthetic biology stands to fundamentally transform how we live.