The private equity firm TPG is set to begin trading on the Nasdaq on Thursday morning, after pricing its initial public offering at a $9 billion valuation. Going public is the latest milestone for the 30-year-old firm — but now it must convince investors that it can compete with its publicly traded rivals.
TPG’s listing is the first big stock market debut of the year, with bankers closely watching its performance to monitor the health of the business of initial public offerings. (The software company Justworks on Wednesday postponed its offering, citing market conditions.) TPG sold shares at $29.50, the midpoint of its expected price range.
Going public will help prepare the firm for the future, its leaders told the DealBook newsletter. Having a publicly traded stock will give the firm a new way of compensating employees and a currency for buying new businesses. TPG is also using proceeds from the offering to buy out minority stakes held by outside investors. (Its leaders are not selling any of their holdings.)
It is going public at an auspicious time for publicly traded private equity. Rivals like Blackstone and KKR have outpaced the S&P 500 over the past year, though TPG executives say they began planning the firm’s offering before the surge in those stocks.
But TPG must prove it can grow. Critics say that TPG is smaller than its peers — it manages $109 billion, a fraction of the $731 billion that Blackstone oversees — and more dependent on traditional leveraged buyouts, a lumpy business, for revenue. The firm’s executives counter that TPG was among the first firms to push into growth equity, including early investments in Uber and Airbnb, and that it was ahead of the curve on investments with environmental, social and governance, or E.S.G., credentials.
“We have always been builders and innovators,” Jim Coulter, the firm’s co-founder and executive chairman, said in an interview. “We are very proud of what we have built.”
Executives acknowledge that TPG has scope to diversify. Jon Winkelried, the firm’s chief executive, said in an interview that “we don’t need to do anything,” but he added that there were “certain parts of the market that we’re currently not in” that made sense to enter.
That may include credit investment funds, a big business for the other publicly traded private equity firms that TPG will now be compared with more directly.