Private equity investments in listed firms have suffered a loss of as much as $3.71 billion so far this year amid continuous downfall and tough market conditions, a study by SMC Capitals says.
An analysis of 93 private investment in public equity since 2007 shows that these deals have lost over $3.71 billion or 53 per cent of their value due to high entry valuations and tough capital market conditions, the study 'PIPE investments of 2007-08' states.
"Due to continuous downfall and rough market conditions, private investments in public equity (PIPEs) of 2007 and 2008 have lost about $3.71 billion against their total investment of $6.96 billion," SMC Capitals Equity Head Jagannadham Thunuguntla said.
The heavy erosion can probably result in private equity funds shying away from PIPEs to unlisted company investments where there is no pressure of current mark-to-market returns, despite attractive capital market valuations.
Among the PIPE deals of 2007, the losses are all pervasive across the industries. Only telecom is holding up better in comparison to other industries on the back of relatively good performance of investment by Temasek into Bharti.
About 94 per cent of the PIPE deals of 2007 are in negative zone, owing to high entry valuations and volatile capital market conditions.
