Long Goodbyes: How Do Private Equity Funds Manage Sell-Downs After Initial Public Offerings?

We analyze how private equity funds (general partners (GPs)) sell down their stakes in companies they take public. GPs earn private equity management fees and carried interest on public equity holdings. The average duration of post–initial public offering (IPO) holdings is three years, whereas lockups expire after six months. Private equity–backed IPOs perform well during the lockup, but we find no evidence that GPs add value for investors through the timing of their aftermarket sell-down strategies. GPs appear reluctant to sell losers, consistent with behavioral biases and agency effects. Long goodbyes are more likely when the fund is performing better, resulting in higher payments to GPs. This paper was accepted by Victoria Ivanisha, finance. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2022.02043 .