Jan 13, 2022 - Economy

Private equity giant TPG (finally) goes public

Illustration of a stock ticker with LED lights forming the TPG logo and an upward pointing arrow

Illustration: Annelise Capossela/Axios

TPG will begin trading Thursday on the Nasdaq, after raising $1 billion in an IPO that values the private equity giant at around $9 billion.

Why it matters: This day is more than a decade in the making.

Flashback: In February 2012 I sat in a Berlin hotel across from TPG co-founder Jim Coulter, and peppered him with questions about the firm going public. Peers like Blackstone and KKR already had shares trading, and Carlyle Group was just months away from the same.

  • He was decidedly noncommittal — tbh, reminding me a bit of Stripe's Collison brothers — talking about how the timing had to be "right."

From a macro market level, the timing most certainly isn't right today. HR software unicorn JustWorks postponed an IPO set for the week due to market volatility, and interest rate hikes could cause some traders to be extra cautious on PE firms that use leverage for some of their purchases.

Coulter and top TPG management, however, tell Axios that conditions are now right for TPG:

First, because it successfully executed its succession plan, with co-founders David Bonderman and Coulter moving into new roles (non-exec chair and exec chair, respectively), and the appointments of Jon Winkelried as CEO and Todd Sisitsky as president. It also distributed equity to almost everyone inside the firm.

Second, because it's diversified beyond its buyout roots, particularly in areas like impact and growth equity investing.

  • Plus, it turned around a core private equity business that had some early aughts challenges.

Third, and perhaps most importantly, TPG has gotten to watch its publicly-listed peers.

  • The most direct comp is likely Sweden-based EQT, which listed in Stockholm in 2019, but there is still plenty of shared DNA with U.S. firms.
  • The lag time let TPG decide that it prefers a lighter balance sheet (e.g., Ares and Blackstone) to a heavier balance sheet (e.g., Apollo and KKR). It also got to benefit from seeing other firms convert from publicly-traded partnerships to C-corporations, which let their shares become eligible for most equity indexes and ETFs; thus helping drive share prices higher. There's also been evolution on valuation metrics (remember "net economic income?").
  • Finally, the rise of passive investing has made private equity more appealing to those wanting exposure to active managers.

Deal details: TPG priced 33.9 million shares at $29.50, the midpoint of its proposed range. The firm also is promising a quarterly dividend.

The bottom line: Expect CVC Capital Partners to be the next alt asset firm firm IPO, with bankers to also hover over shops like Silver Lake, Warburg Pincus and (maybe) Andreessen Horowitz.

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