Strong Stock Market Fuels Surge in Secondary Offerings
October 10, 2013
No surprise here.
Thanks to a surging stock market in 2013 (the S&P 500 is up more than 16% year-to-date), secondary offerings have been an increasingly popular exit route for PE firms to liquidate holdings in publicly traded portfolio companies. According to the PitchBook Platform, U.S.-based, private equity-backed companies have announced or completed 47 secondary offerings since the beginning of this year, which have resulted in the cashing in of more than $15 billion worth of stock.
IPOs create bigger splashes than quieter secondary offerings, but more than a few firms have sold significant stakes through secondary offerings during the stock market surge. Palladium Equity Partners, for example, sold 69% of its holdings in Regional Management (NYSE: RM) in late September. Proceeds from the offering added up to $67 million, resulting in a 5x return on that portion of the firm's investment. August and September were particularly enticing months for firms to cash out, with 18 secondary offerings in just two months.