For the second time in a month a big European firm has unveiled plans to raise primary capital through a stake sale. EQT posted its intention to list on Nasdaq Stockholm earlier this week, aiming to raise €500 million in primary capital as well as provide some liquidity for existing shareholders. Around 20 percent of the firm’s share capital should end up publicly traded.
A public listing of a private markets firm goes against the grain and some prominent firms have sat uncomfortably on public exchanges. At times this year both Blackstone and Carlyle Group traded below their respective 2007 and 2012 IPO prices (although both have since risen). Other examples include Fortress Investment Group, which was delisted by SoftBank at the end of 2017, and Oaktree Capital Management, which is effectively being taken “private,” albeit by another, larger listed asset manager.
Some managers view public listing as fundamentally problematic for asset managers. As Anthony Tutrone, head of alternatives for privately held asset management heavyweight Neuberger Berman, recently told PEI‘s Isobel Markham: “There are going to be decisions where you have to decide who’s more important, the public shareholder, or the investor? You have a responsibility to both. I am very happy we do not face these challenges.”
The reasons for PE firms wanting to raise primary capital are clear and pressing. New money allows ambitious managers to seed new strategies, grow into new geographies and make bigger GP commitments to their funds. It allows them to stay competitive and could prove vital if economic conditions worsen. It also clarifies and facilitates succession plans.
Not all public listings of PE firms have proved unhappy; Partners Group debuted on SIX Swiss Exchange in 2006 at a share price of SFr63 ($64; €58) and now trades at over SFr800. But public listings for PE firms have fallen out of fashion just as alternative sources of equity capital have emerged. Three deep-pocketed financial investors – Dyal Capital Partners, Goldman Sachs’ Petershill Funds, Blackstone Strategic Capital Holdings – are queuing up to back credible platforms. BC Partners, which in early August unveiled an investment from Blackstone’s fund stakes unit, would attest to this. It reportedly raised €500 million for the sale of a stake of between 10 and 15 percent, and tied itself to a shareholder that can open doors for its nascent real estate and credit businesses.
So why would EQT subject itself to the reporting requirements of public markets when private buyers are capable of providing the same capital? The answer is that this is about more than just money. The firm talks in its press statement about creating “a more transparent governance structure,” as well as raising its profile with investors around the world: two things a private sale does not necessarily do.