Private equity, a favored sector for many asset allocators, is inching its way back after a disappointing past two years, amid improvements in stalled exit revenues, qualms about stocks’ general direction and forecasts of a recession.
But regardless of what happens to PE as an asset class in 2024, expectations are building among PE purveyors that “a new wave of IPOs could be in the offing for 2024,” according to a PitchBook analysis. Namely, among PE firms themselves.
A catalyst for their going public: Despite a choppy stock market during the last couple of years, public PE firms’ stock has done pretty well. Returns among the top seven U.S.-listed PE companies have crossed into double digits, with a median gross return of 11.5% for the 12-month period ending with 2023’s third quarter, by PitchBook’s count.
Private equity firm General Atlantic recently confidentially filed its intention to go public, per a Bloomberg report. (This is an initial step that allows companies to get their paperwork in without an immediate public disclosure of their operations.)
The New York-based firm, founded in 1980, was an early investor in Meta Platforms, when it was known as Facebook; Uber Technologies; and Airbnb. General Atlantic closed its sixth growth equity fund at $7.8 billion in 2021. It did not respond to requests for comment.
Meanwhile, a couple of European PE outfits are eyeing a public offering, PitchBook found: Luxembourg’s CVC Capital Partners and France’s Ardian. L Catterton, headquartered in Greenwich, Connecticut, also is reportedly weighing an IPO.
The allure for PE chieftains is a big payday from an IPO if they tender some of their stakes and a good avenue for the firms to raise capital in the future via secondary offerings.
The biggest recent private equity IPO was TPG’s, in February 2022, when its shares jumped 15% on its first day of trading. This year, the stock is up 31%, almost nine percentage points better than the S&P 500’s performance. TPG’s earnings have been strong in 2023, partly due to sales from its portfolio, particularly that of Hollywood talent outfit Creative Artists Agency.
In 2021, the most noteworthy private equity stock debut was that of Blue Owl Capital, the shares of which are ahead 40% in 2023.
Blackstone was the first major PE firm to go public, in 2007. In the wake of the global financial crisis, a crop of important PE players followed, such as KKR, the Carlyle Group and Apollo Global. Performance was not always great back then, as Blackstone and Carlyle lagged behind the S&P 500 for five years after their offerings.
Going forward for IPO-minded PE firms, a lot depends on how the stock market fares. While the S&P 500 is close to reaching its 2021 peak, reversals earlier this year make managers at possible IPO candidates nervous. Plus, as public corporations, PE outfits have less freedom of maneuver.
As PitchBook put it, “Aside from getting the timing right—particularly in the current climate—going public means greater regulatory oversight and requires more transparency.”
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Tags: Apollo, Ardian, Blue Owl, Carlyle, CVC, General Atlantic, IPO, KKR, L Catterton, PitchBook, Private Equity, Stock Market, TPG