As private equity firm TPG presses on with a stock market flotation later this month, it disclosed on January 4 that it is aiming for a $9.5 billion valuation in its U.S. initial public offering (IPO).
Sources previously said that TPG was suspended from pursuing a public listing, due to the underperformance of its peers’ shares over much of the last decade. In addition, the firm was making attempts to recover from a string of poor investment decisions in the 2000s and diversify its private equity platform into growth and social impact investing.
TPG decided to pull the IPO trigger with the global economic recovery from the COVID-19 pandemic turbocharging the buyout of the industry’s profits and driving a rally in the shares of its peers and interest rates at record lows.
Around 28.3 million shares priced between $28 and $31 apiece were planned to be sold in the offering by the Fort Worth, Texas-based firm, an investor in Airbnb Inc (ABNB.O), Uber Technologies Inc (UBER.N), and Spotify Technology SA (SPOT.N).
At the top end of its indicated price range, TPG would raise about $877.6 million. TPG shareholders who plan to cash out would receive about 40% of that. That exempts its founders, who plan to keep their holdings for now.
The firm said that expenses and funding TPG’s business, including growth initiatives would take up the rest of the proceeds.
In 1992, David Bonderman and Jim Coulter founded the company as Texas Pacific Group and then in 1993 it made its first investment in then-bankrupt Continental Airlines. It also invested in sectors ranging from retail to healthcare. Today, it has around $109 billion in assets under management.
Huge bets made by the firm two decades ago went sour on companies such as Texas power utility Energy Future Holdings Corp, casino operator Caesars Entertainment Corp (CZR.O), and floundering bank Washington Mutual Inc. Washington Mutual was seized by federal regulators during the 2008 financial crisis and reached a deal to sell most of its operations to JPMorgan Chase & Co (JPM.N).
TPG’s fortunes finally recovered as it managed to convince enough of its investors to stick with it. After reporting that its net income for the nine months to September 2021 jumped more than fivefold to $1.7 billion, it seems like its business is now booming. Its revenue surged from $564.4 million a year earlier to $3.89 billion.
Insiders Retain Control
Bonderman, Coulter, Chief Executive Jon Winkelried, and other partners will continue to control TPG under a dual-class share structure that gives the executives about 98% voting control over the firm.
When TPG’s peers went public, they also adopted the arrangement, although, in the last two years, most of them have converted into a one-share-one-vote structure. With an exception of Blackstone Inc (BX.N), whose CEO Stephen Schwarzman has kept control.
Sometime in the next five years, TPG said it would end the dual-class stock arrangement. It said that it planned to expand its controlling group in the next two years by inviting two of its partners to join Bonderman, Coulter, and Winkelried.
About $174 million was collected by Bonderman in 2021 as dividends and compensation, which consists of carried interest, base salary, and bonuses. According to the filing, Coulter received $23.8 million in compensation, Winkelried earned $11.6 million while TPG President Todd Sisitsky took home $42 million.
The lead underwriters for TPG’s offering are J.P. Morgan, Goldman Sachs, Morgan Stanley, TPG Capital BD LLC, and BofA Securities. It now plans to list under the symbol “TPG” on the NASDAQ.
