Hmm, I’ll be controversial. Twinned secondaries, i.e. secondaries tied to a primary, are almost always a give away to senior management and the buyer. (They’re frequently syndicated at double-digit spreads.)
If the company sucks, senior management gets cash back first while the investor gets top-of-stack liquidation preferences. If the company is doing great, the investor gets to buy stock at a price almost always lower than market.
They’re common in Silicon Valley, because they’re good for founders and the Board members. But they’re rare in public markets. The closest thing I can come up with is the current clusterfuck with Shari Redstone.
Fund buys stock at X and simultaneously solicits LPs at 1.2X (whether by straight mark-up or, more commonly, by adding management fees, research fees, expense reserves and carry.)
It’s why tenders have a few weeks between end of sellers submitting requests, confirmation of quantities and finally funding.
Interesting, thanks! Not to get too far off on this tangent, but how is that different from the way VCs / investment funds work in general (taking fees from the LPs in exchange for their services)?
> how is that different from the way VCs / investment funds work in general (taking fees from the LPs in exchange for their services)?
VCs usually raise a fund, i.e. a basket of commitments from LPs, before finding the investments. That means they negotiate the investment terms from a position of strength, commitments in hand.
With tenders, the investor starts by commiting to the issuer and then finds LPs. To the degree they have leverage, it's in their access to the issuer.
For the former, the fees are in exchange for risk. For the latter, they're for access.
If the company sucks, senior management gets cash back first while the investor gets top-of-stack liquidation preferences. If the company is doing great, the investor gets to buy stock at a price almost always lower than market.
They’re common in Silicon Valley, because they’re good for founders and the Board members. But they’re rare in public markets. The closest thing I can come up with is the current clusterfuck with Shari Redstone.