TPG post-IPO: will the share prices uptrend continue?

Private equity company TPG’s share price remained firm after its initial public offering (IPO) on the Nasdaq last week.

The Texas-based global alternative asset management company listed on 13 January 2022, offering 33.9 million Class A common stock at $29.50 a share. That same day, the TPG stock price hit a high of $34.79.

Although the price was trading $31.30 on 18 January after its public debut, it remained 6% above its IPO median target. The increase has lifted the TPG valuation to $10.4bn.

Some of TPG’s high-profile start-up investments include holiday accommodation platform Airbnb, music streaming service Spotify and mobility service provider Uber. Fuelled by the growth in remote working brought about by the Covid-19 pandemic, many technology stock values surged last year.

With outsourced human resources platform Justworks postponing its IPO last week, investors have focused on the TPG listing.

Are you interested to learn more about the outlook for TPG post-IPO? Read on for insight into the TPG business model and news affecting the equity market.

TGP IPO 2022: what you need to know

Company overview

TPG was founded in 1992. Its first investment operations focused on the San Francisco Bay area. Over 30 years, the company has grown to become a global alternative asset manager with approximately $109bn in assets under management (AUM), as of 30 September 2021, according to TGP’s US Securities and Exchange Commission filing.

According to TPG, it “primarily invests in non-traditional, complex asset classes such as private equity, real estate and public market strategies, which is distinct from other asset managers that invest only in traditional asset classes, such as stocks, bonds or commodities.”

The company’s asset management portfolio consists of five multi-product investment platforms: 1) Capital, 2) Growth, 3) Impact, 4) Real Estate and 5) Market Solutions.

TPG says four of the aforementioned platforms have “generated substantial value creation over the last 12 months [LTM]”, leading to a return of $22bn to its investors during the period.

Source: TPG SEC filing

LTM value creation measures the value change of the platform during the last 12 months divided by the sum of the unrealised value at the beginning of the measurement period and capital invested in follow-on investments made during the same period.

In-house expertise

TPG has said that its in-house “operations team continues to be a core differentiator in our ability to drive strong growth in our portfolio companies and the resulting strong performance in our funds.”

In contrast to many of its competitors, who outsource operational work to consulting companies, TPG carries out “the vast majority of value-added operating activities” in-house by employees. The company believes its success was driven by its people and “the differentiated culture they create.

Rising net income, risks of poor fund performance remain

TPG’s net income has been rising for the past three years. The rebound in the post-pandemic equity market last year further boosted performance, leading to a surge in the company’s net income over the first nine months of 2021. TPG’s net income in January 2021 to September 2021 increased to $3.82bn – up nearly 13-fold from the same period in 2020.

Source: TPG SEC filing

TPG derives its revenues primarily from:

• management fees, which are generally based on the amount of capital committed or invested in our funds
• performance allocations, which are based on performance of our funds
• investment income from investment as general partner
• compensation for brokerage and various capital market services
• expense reimbursements

Due to the nature of asset management funds, TPG warned that lower investment returns from its funds could materially affect its income.

TPG after IPO: new corporate structure

Prior to the IPO, more than 80% stake of the TPG Operating Group was held by members of the group’s management, employees and former employees. While the remaining shares were held by pre-IPO investors.

Following the IPO, the new anticipated TPG’s corporate structure could be as below, assuming no exercise of the underwriters’ option to purchase additional shares.

Source: TPG SEC filing

The existing majority shareholders will retain the biggest voting power in the newly listed group, while investors in the offering will have 1.4% of the total voting power. 

TPG market outlook

Due to the stock’s short trading history, there is no TPG share price forecast. However, the short-term market outlook for the group is mixed, with some analysts urging caution owing to volatility in the equity market, while others see upside potential.

Investment advisory company owner Kent Thune told Seeking Alpha on 10 January:

According to financial data provider Investing.com’s consensus estimates on TPG, the weekly technical analysis on 18 January indicates a “strong buy” based on the moving averages.

When considering whether to invest in a company’s stock, you should always do your own research, and consider the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macro-economic factors. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking in such things as the environment in which it trades and your risk tolerance. Past performance is no guarantee of future success. And never invest money that you cannot afford to lose.

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