What happened
The private equity firm that once controlled aircraft maintenance services provider AerSale (ASLE +2.75%) is selling down its ownership stake, and investors are not pleased to see the sale. Shares of AerSale traded down as much as 14% on Wednesday following the announcement.
So what
Leonard Green & Partners took control of AerSale in 2010, investing in the owner of used aircraft, spare engines, and other components and helping to grow the business. AerSale went public in 2020 via a deal with a special purpose acquisition corporation (SPAC), and has slowly been selling down its stake in the quarters since.
In this latest offering, certain AerSale holders, including affiliates of Leonard Green, will sell 4 million to 4.6 million shares into the market. The deal would reduce Green's ownership stake to 38.1%, from 45.6%.
The deal was priced at $15.50 per share, a discount to AerSale's $17.75 close on Tuesday. Secondary offerings are often priced at a discount to the market price to ensure there is ample demand to sell the shares.
NASDAQ: ASLE
Key Data Points
Now what
Investors shouldn't read anything into Leonard Green's decision to sell. Private equity firms are in the business of making investments and then cashing out at a higher price, and a secondary sale should not be taken as a sign that the inside money sees looming issues at AerSale or doesn't believe in the company.
That said, the ownership stake is likely to continue to be an overhang on the stock. Even after this latest sale, affiliates of Green still hold more than 19 million shares of AerSale. Presumably the stock will continue to be sold into the market, and at the current rate of sales that could take a year or more to complete.
With airlines and private jet operators grappling with high fuel and labor costs, there is a market for reliable outsourced maintenance and for spare parts. AerSale should do well in such an environment, and there is a solid case for long-term-focused investors to buy in and ride out the turbulence. But know that as long as additional secondaries are possible, there will be more days like this in AerSale's future.
