Long ago — okay, March of this year — there was much talk of a private equity put. That is, investors had it in their heads that, given nearly centi-billion-dollar private equity funds, pretty much every company in the world was in play. As a result, many companies traded with that premium embedded, much to shareholders’ glee.
When things went off the credit rails this summer the “PE put” more or less disappeared. With credit becoming much harder to get, it was tough to price in a high likelihood of INSERT FAVORITE COMPANY HERE ever being in play, the way you could back in the halcyon days of early 2007.
But is that busily changing? In a sense, I’d argue yes. The news today about Abu Dhabi’s cash unfusion at Citi has, to one way of thinking, put most of the U.S. financials in play, neatly reinstating everyone’s favorite market-wide put option. That helps explain why stocks are trending mostly higher across the board.
Isn’t that fun? The credit market collapses, and wipes out the private equity put — only to have it begun to be reinstated because of sovereign wealth funds around the world. Aren’t markets great?