Will LPs Pay YOU To Take Their Shares? (Short Answer: Yes)
UPDATE The story has been updated to include additional comments from Liaudet. Desperate private equity and venture capital limited partners are considering paying “negative premiums” to secondary buyers in order to get out of their investments. This goes beyond a simple discount to net asset value (NAV). This means limited partners actually hand over cash to secondary buyers in exchange for taking over their stakes. It’s music to a secondary buyer’s ears after years of paying actual premiums for LP stakes. The return of the negative premium isn’t shocking, as discounts on the secondary market sink from 50% of NAV all the way to 100%. LP interests were exchanged at negative premiums in the aftermath of the venture bubble as well. However, it’s slightly different this time, because this backward pricing is a result of LP capital constraints and not the performance of the underlying funds, according to intermediaries I spoke with.
