Apr 28, 2014

Private equity floats are duds — their own research proves it

By cherry-picking data, the private equity sector has come up with a report showing how well private equity floats do. Business director and commentator John Addis looks a little deeper.

You can’t blame private equity for selling dud floats to ignorant investors. Buying underperforming businesses, gearing them up, turning them around and then selling out at the highest possible price is the what private equity should do. The fact that many floats now trade below their issue price is evidence of a job well done — stiffing mug punters just happens to be part of it.

But each time private equity “wins” by flogging an over-priced business, getting the next float away becomes that much harder. Eventually, even the most naive of investors will catch on and avoid private equity floats altogether. That’s a bit of a problem for the float pushers; if everyone realises they’re often selling garbage, who will be left to buy it?

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One thought on “Private equity floats are duds — their own research proves it

  1. klewso

    Does this research prove the old adage “There’s money in shite!”?

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