Long Goodbyes: Why do Private Equity Funds hold onto Public Equity?

72 Pages Posted: 25 Jan 2021 Last revised: 30 Jun 2021

See all articles by Tim Jenkinson

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Howard Jones

University of Oxford, Saïd Business School

Christian Rauch

American University of Sharjah

Date Written: June 30, 2021

Abstract

We analyze how private equity funds sell down their stakes in companies they take public. The average duration of post-IPO holdings is 3 years, whereas lockups expire after 6 months. PE-backed IPOs perform well during the lockup, but we find no evidence that GPs add value for investors through the timing or speed of their sell-down strategies. GPs appear reluctant to sell losers, which is consistent with behavioral biases or fear of litigation. Faster sell-down strategies could have saved investors around $3.5bn in management fees alone. We discuss how, in the future, stock distributions followed by Direct Listings could significantly increase net returns to LPs.

Keywords: Private Equity, Initial Public Offerings

JEL Classification: G23

Suggested Citation

Jenkinson, Tim and Jones, Howard and Rauch, Christian, Long Goodbyes: Why do Private Equity Funds hold onto Public Equity? (June 30, 2021). Available at SSRN: https://ssrn.com/abstract=3753480 or http://dx.doi.org/10.2139/ssrn.3753480

Tim Jenkinson (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Howard Jones

University of Oxford, Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/about-us/people/howard-jones

Christian Rauch

American University of Sharjah ( email )

P.O. Box 26666
University City
Sharjah, Greater Dubai Area
United Arab Emirates

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