In what some thought first major initial public offering (IPO) new year, private capital TPG (NASDAQ:TPG) debuted in trading today. The TPG stock IPO stirred waves as hordes of investors screamed about it “The next generation” a giant of private capital.
What’s going on with this latest IPO that has garnered headlines?
The main news of TPG lately is its restructured capacity compensation model. It offers shareholders only 20% of future performance-based profits, which is 30% less than previous prospectuses. Instead, the company offers shareholders a higher percentage of its management fees, which is a more stable measure of earnings.
This is a departure from its historical structure, which was largely dominated by a strong reliance on performance commissions, which accounted for as much as 80% of its revenues. However, the departure from performance fees has become increasingly popular in the world of private equity. Saul Goodman, Head of Alternative Asset Management Banking at Evercore (NYSE:EVR), explained the change to Financial Times. He said: “This is a new standard. Almost every banker in the area who currently advises private equity firms on IPOs advises not to contribute a large percentage of performance commissions to a public company. “
LNG is often compared to competitors of private capital Black stone (NYSE:BX) in KKR (NYSE:KKR), which gained greatly during the pandemic. However, TPG is valued significantly lighter as the aforementioned competition.
7 Things You Need To Know About IPO Shares TPG
- TPG will trade under the TPG code at Nasdaq trade.
- The company plans to offer 28.3 million shares at a price of $ 29.50 for about $ 9 billion.
- TPG should raise nearly $ 877 million through an IPO.
- The company intends to spend the funds in various ways. That includes redemption minority stakes in the company, which account for about 40% of IPO revenues. The remaining funds will reportedly be used to expand funding to previously untapped industries and markets.
- TPG raised $ 505 million in profits last year under the new fee structure. These funds are open for distribution to shareholders. Conversely, if it had not adjusted its fee percentages, the figure would have been $ 1.2 billion.
- Compared to the competition, LNG is slightly less diversified. About 80% of its assets are in private equity, compared to Blackstone and KKR, which have higher relative shares in loans and real estate.
- The Texas-based company was founded in 1992 and was formerly known as the Texas Pacific Group.
At the date of publication, Shrey Dua did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are the subject of InvestorPlace.com Guidelines for publication.