TPG IPO: Everything you need to know about TPG

TPG IPO: When will TPG go public?

Private equity firm TPG is scheduled to complete its initial public offering on the Nasdaq on Wednesday January 12. It will trade under the ticker ‘TPG’.

 

How much is TPG worth?

TPG is reported to be targeting a valuation of up to $9.5 billion through its IPO.

TPG has said it plans to offer 28.3 million shares and that will be supplemented with another 5.6 million shares being sold by one of its strategic investors, China Life Insurance Group. That means a total of 33.9 million shares will be offered at a price of between $28 to $31 each.

At the top end of that price range, the company would raise around $878 million through the listing. Around 40% of those proceeds are due to be dished-out to shareholders that plan to cash out, with the remainder being ploughed back into the business.

China Life Insurance Group could reap in an additional $173.6 million via the shares it is offering.

 

How to trade TPG stock

You will be able to trade TPG shares from the open of trade on Thursday January 13.

 

What does TPG do?

TPG is an alternative asset management company that was founded in 1992 and today has a portfolio of investments in over 280 businesses and $109 billion in assets under management. It says it differentiates itself in the market by investing in ‘non-traditional, complex asset classes’ such as private equity and real estate, compared to other asset managers that only invest in traditional assets like stocks, bonds and commodities.

The company has five areas that it predominantly focuses on when it comes to investment. The firm’s assets under management have also be broken out by area:

1. Capital – Focused on large-scale private equity ($52.6 billion AUM)
2. Growth – Growth and middle-market private equity ($22.1 billion AUM)
3. Impact – Private equity investment with focus on societal and financial outcomes ($12.6 billion AUM)
4. Real Estate – Real estate and property investment ($11.5 billion AUM)
5. Market Solutions – Differentiated strategies to address specific market opportunities ($10.3 billion AUM)

Some of the best-known names that TPG has invested in include fintech firm Acorns, rental platform Airbnb, fast food chain Burger King, motorcycle maker Ducati, guitar maker Fender, computer brand Lenovo, retailer Petco, property platform PropertyGuru.com, loan provider Satsuma, music streaming platform Spotify, survey platform SurveyMonkey, ride-hailing giant Uber, and cloud security firm Zscaler.

Notably, over 60% of its investments have been made in either the technology or healthcare sectors.

One particular area of expertise for TPG is carveouts, when one business is separated from a larger one. TPG has completed over 30 of these so far, having carved out the likes of cybersecurity firm McAfee from Intel and Kakao Mobility from South Korean outfit Kakao Corp in 2017. It was also involved in the separation of Allogene from Pfizer in 2018 and DirecTV from AT&T in 2021.

 

How does TPG make money?

TPG, like other asset managers, generate most of their income through realised or unrealised gains on the investments it makes, but also receives revenue from management fees, other fees related to transactions and monitoring.

 

Is TPG profitable?

TPG is profitable and profits have steadily improved in recent years. Below is an outline of TPG’s financial performance over the last three years:

($, thousands)	2018	2019	2020
Revenue	1,403,882	1,987,855	2,114,838
- Fees and other income	847,055	1,031,878	883,366
- Capital allocation-based income	556,827	955,977	1,231,472
Investment income	180,282	166,758	151,429
Pretax profit	719,079	1,186,132	1,448,711
Net income	710,866	1,180,433	1,438,932

(Source: TPG prospectus)

The most recent figures provided by TPG cover the nine months to the end of September 2021, when revenue rose to $3.89 billion from just $564.4 million the year before. Investment income climbed to $548.8 million from $362.6 million while pretax profit jumped to $3.83 billion from just $301.0 million. Net income at the bottom-line surged to $3.82 billion from $295.2 million.

 

Does TPG pay a dividend?

TPG says it intends to pay a quarterly dividend representing at least 85% of distributable earnings, although it has said this may be adjusted when necessary to ensure it can make the investments it needs to keep growing.

 

What is TPG’s business strategy?

TPG believes it has multiple growth vectors going forward thanks to its current scale and what it describes as a ‘multi-dimensional growth strategy’ that can continue delivering attractive returns. It plans to expand its existing investment platforms, launch new ones, and continue developing new products and pursue inorganic growth opportunities.

‘Our near- and medium-term growth trajectory is supported by a balanced mix of highly visible growth across a diverse set of existing products and our considerable undeployed but committed fee earning assets under management,’ TPG said in its prospectus.

TPG has $29.8 billion capital that is committed but not yet deployed and this accounts for 50% of its fee-earning assets under management. It currently has $10.1 billion of assets under management that provide exposure to fee-earning growth.

It also plans to explore inorganic opportunities to drive growth by pursuing strategic partnerships and M&A. For example, it partnered with private equity outfit NewQuest Capital Partners in 2018 to focus on the Asia Pacific region and, as a result, the platform has scaled from just $900 million in assets under management to $2.4 billion at the end of September 2021. This also gave it the confidence to then go on and launch secondaries businesses in the US and Europe in 2020 and prompted it to take a majority stake in NewQuest.

 

Who owns TPG?

TPG will continue to be controlled by its two founders David Bonderman and Jim Coulter, as well as CEO Jon Winkelried, once the listing is completed. TPG will continue to have a dual-class share structure that will mean the trio and their other partners will have control over about 98% of the company’s voting rights.

TPG is offering Class A shares under its IPO, but those with Class B shares will hold the bulk of the voting rights – although they will not be entitled to dividends.

TPG plans to bring all shares under one single share structure sometime in the next five years.

 

TPG board of directors

Below is an outline of the management of TPG:

• David Bonderman – Founder and non-executive chairman
• James Coulter – Founder and executive chairman
• Jon Winkelried – Chief executive officer
• Jack Weingart – Chief financial officer
• Todd Sisitsky – President
• Anilu Vazquez-Ubarri – Chief human resources officer
• Ken Murphy – Chief operating officer
• Bradford Berenson – General counsel
• Joann Harris – Chief compliance officer
• Maya Chorengel – Director
• Jonathan Coslet – Director
• Kelvin Davis – Director
• Ganendran Sarvananthan – Director
• David Trujillo – Director
• Mary Cranston – Director
• Deborah Messemer – Director