When Does A Crappy Deal Become Good?

First this.

We've made this point before. There is an element of private equity/credit firms needing retail bag holders' via 401k plans to soak up deal supply. I do not think 401k plans have any shot of getting in on the "good deals." 

How did Robinhood's private markets retail fund do on day one?

The $4 dollar drop isn't as bad as it first seems. The first print was at $22, a $3 drop. That is likely the sales charge paid by people who bought on the offering. Never buy closed end funds on the offering. There is a process where the sales charge gets worked quickly off in the market. If the sales charge was $3 then people buying the offering were paying $25 for $22 worth of assets. It doesn't look like the sales charge is publicly available but some or all of the $3 drop is the market discounting whatever the actual sales charge was and doing it very quickly. 

A funny story that I've told before. I worked at Morgan Stanley for about ten minutes in 2002/2003 and there was some sort of closed end fund offering and of course there was a sales credit available to us for any shares we placed. Knowing how these work, I stayed away. I got asked about it by a senior guy in the office, I explained the sales charge issue, he got pissed and told me I was wrong. Of course that is exactly what happened but he never brought it up again. From back then, I remember the sales charge being more like a buck and half but maybe it was more for RVI due to it being riskier....or crappier. 

Boaz Weinstein from Saba is partnering with Cox Capital to try to buy a lot of Blue Owl's distressed assets. Blue Owl was able to sell some of the good stuff for more than 99 cents on the dollar to meet some redemption demand. It looks like Saba and Cox are trying to buy assets from Blue Owl between 65 cents and 80 cents on the dollar. 

I saw a comment somewhere about this noting that if Weinstein is trying to buy, retail investors should not be so quick to sell. There is logic to that of course. I am glad I don't have to try to make that decision but there is a price where what was originally a crappy deal becomes a good deal. Buying RVI at a big premium wasn't a good idea but buying at some whopper of a discount might be.

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