Selling an illiquid asset at a discount is a desperate action that desperate people do when they need fast cash. On a related note, Harvard Management Company (Harvard’s endowment) is considering selling some of its illiquid assets at a discount to quickly raise some cash.
This Harvard Crimson piece, “HMC Plans $1 Billion Sale of Private Equity Stakes,” quotes a Rutgers Business School professor as stating that “in most secondary sales, assets are sold at a discount, meaning [Harvard] would only benefit if they need extra cash on hand — or if they believe the stakes up for sale will lose value in the future.”
In other words, Harvard is either unloading bad assets which are worth less than their book value, or they’re selling at a discount because they’re desperate for cash. (Or both.) Either scenario is very bad.
I have been writing about Harvard’s cash scramble at various outlets, including this recent piece at The Blaze, in which I discussed how Harvard has had to repeatedly keep borrowing more money, going to the debt markets four times in barely a year to raise about $2.5 billion. This is money needed to ensure staff gets paid and the lights remain on as the historical operating cash flow from donors and government has dried up.
“Harvard’s broke and begging — but it still won’t change its ways” [The Blaze]
In the past two months, Harvard has turned to the bond markets twice to quickly raise over $1 billion in cash. This follows a scramble in 2024 to raise $1.5 billion through similar bond offerings, which still fell short of its initial target.
In April, Charles Gasparino hinted that Harvard was starting to sell some of the liquid assets in its endowment, e.g. stocks and bonds. He wrote ”Wall Street execs who follow the college endowment business say it's only a matter of time before Harvard starts selling what's liquid in its portfolio, ie stocks, maybe issue more debt, if its tax-exempt status remains revoked. There are UNCONFIRMED market reports that the selling has already begun.”
As we’re learning now, the situation was even worse than what Mr. Gasparino was hearing. Selling stocks and bonds at least gets you a dollar-for-dollar price on the exchange value of your asset. A desperation sale of an illiquid asset, such as a stake in a private equity investment, is like selling a prized possession to a pawn shop. “Forced liquidation value” of anything means that a big financial haircut is going to be realized.
It gets even worse for the Poison Ivy school.
Harvard’s endowment is famously (allegedly?) valued at $53 billion. Beyond the discount required to sell an illiquid asset, investor Bill Ackman believes that the underlying value of the endowment has already taken a huge hit, because private equity uses leverage as a multiplier of investment gains. This multiplier effect can also work in reverse in regard to losses, and probably has. In his example, “if a real estate fund’s asset values decline by 15% and the assets are levered 60%, the fund’s equity value will decline by 37.5%.” In speculating how much cash Harvard could generate by selling its illiquid, impaired assets, Ackman wrote, ”the realizable values of Harvard’s private assets could be as low 40% of current carrying values if Harvard needs to liquidate substantial portions of its assets to meet its obligations.” Ackman estimates that the actual realizable value of Harvard’s endowment might not exceed $40 billion right now. That represents a $13 billion book loss that has already occurred to Harvard’s legendary endowment.
In offloading some of its illiquid private equity investments, Harvard may be counting on finding a “greater fool” who wants to bask in the glow of being a partner with Harvard in its exclusive investment club. Forbes magazine just published a warning to those potential greater fools about how Harvard is willing to take some measure of loss in order to transfer the rest of the risk to everyday investors.
“Is Harvard’s Private Equity Selloff A Trap for Retail Investors?” [Forbes – 5/22/2025]
Private equity investors, including endowments, are desperate to offload illiquid stakes. By marketing these assets to retail investors, Wall Street creates a new pool of buyers—less sophisticated investors who may not fully grasp the risks.
So, is Harvard now reduced to fleecing rubes from flyover country with its tarnished private investments to cut its losses and get some quick cash? It would appear so. But even that is just a short-term fix.
Harvard is in a doom loop. Its donor base is diminishing and sitting on their wallets, as many of them are repulsed by what the school has become and how tainted its brand is. President Trump is cutting off the flow of federal dollars to the school. Harvard has tapped out the bond market, and further bonds will likely start to be priced at junk bond levels if the school has to keep borrowing to plug holes in its cash flow. The endowment is crashing in value, and its illiquid assets are being sold at a fire sale.
The Harvard asset that always held the most value was its reputation. Having foolishly decided to destroy that asset in service to a globalist political ideology that is hostile to the United States and western civilization, the seeds were planted for the doom loop that is consuming the disgraced university.
[buck.throckmorton at protonmail dot com]