Discount PE 'follow

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 IPO prices, according to a report by The Financial Times.

Private equity firms traditionally use "follow-on offerings" of previously listed portfolio company shares to to monetise their investments and return cash to investors. But according to data from Dealogic, follow-ons were badly hit by last year's stock market declines, with sales by PE-backed companies dropping more than 70 per cent.

Sales have now started to recover with PE-backed follow-ons in the US up 180 per cent year-on-year, but at discounted prices. According to the FT, two-thirds of the deals were priced well below IPO prices.

The biggest discount was seen in March when Blackstone sold a 10% stake in dating app Bumble at about half the $600 million it was worth when the company listed in 2021.

Other major firms to sell stakes in portfolio companies at a discount to their previous price include Apollo, General Atlantic and Vista Equity Partners.