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Alternative Assets  + Private Equity  | 
Discounted Share Sales in Portfolio Companies on the Rise

Discounted Share Sales in Portfolio Companies on the Rise

In a sign that stock market valuations are not expected to regain their previous highs anytime soon, private equity firms are increasingly selling shares in portfolio companies at a discount to their initial public offering (IPO) prices, according to a report by The Financial Times.

As the report notes, these “follow-on offerings” are an important way for private equity companies to offer a return on investments. When the stock market declined last year, these offerings fell by more than 70%, the FT said.

Now, however, they’ve begun to rebound, even as valuations for recently listed companies have remained low. Private equity driven follow-ons in the US are up 180% this year, the FT said, even though nearly two-thirds of the deals were priced below the companies’ IPO.

According to the FT, the most glaring example of this trend happened in March, when Blackstone sold a 10% stake in dating app Bumble for a little more than $300 million, roughly half its IPO price.

As of last month, traditional IPOs had raised $2.3 billion in the U.S. for 2023, the worst start to a year since 2009. The situation was even more dire last year: listings hit a 20-year low as investors — worried about high interest rates and inflation — avoided high-growth companies.

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About Joe Palmisano

Joe Palmisano is Editorial Director for Connect Money, where he brings nearly three decades experience of market insights as a financial journalist, analyst and senior portfolio manager for leading financial publications, advisory firms, and hedge funds. In his role as Editorial Director, Joe is responsible for the selection of content and creation of daily business news covering the financial markets, including Alternative Assets, Direct Investment and Financial Advisory services. Before joining Connect Money, Joe was a financial journalist for the Wall Street Journal, regularly publishing feature stories and trend pieces on the foreign exchange, global fixed income and equity markets. Joe parlayed his experience as a financial journalist into roles as a Senior Research Analyst and Portfolio Manager, writing daily and weekly market analysis and managing a FX and US equity portfolio. Joe was also a contributing writer for industry magazines and publications, including SFO Magazine and the CMT Association. Joe earned a B.S.B.A. in Finance from The American University. He holds the Chartered Market Technician (CMT) designation and is a member of the CFA Institute.

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