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Venture Capital: VCs And Startups Rejoice – The NYSE Has An Alternative To IPOs

In a ruling Wednesday, the SEC gave the New York Stock Exchange the green light to let companies raise capital through a “Primary Direct Floor Listing” process. Before this decision, private companies could use the direct method to list their shares on the stock exchange but did not themselves receive any of the proceeds from the IPO. That’s because this route allowed existing investors in those companies to sell their shares on the market (“Selling Shareholder Direct Floor Listing”), with no new capital being raised by the company itself.

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Venture Capital: VCs And Startups Rejoice – The NYSE Has An Alternative To IPOs

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The SEC has approved a proposal by the NYSE to allow private companies to raise capital through direct listings.

In a ruling Wednesday, the SEC gave the New York Stock Exchange the green light to let companies raise capital through a “Primary Direct Floor Listing” process. Before this decision, private companies could use the direct method to list their shares on the stock exchange but did not themselves receive any of the proceeds from the IPO. That’s because this route allowed existing investors in those companies to sell their shares on the market (“Selling Shareholder Direct Floor Listing”), with no new capital being raised by the company itself. (Yahoo Finance)

Under the Primary Direct Floor Listing process, the exchange conducts an opening auction on the day the company lists. The opening auction matches buy and sell orders to arrive at a market-determined offering price.

Big win for venture capitalists and the NYSE

The SEC’s decision is a shot in the arm for the NYSE and venture capital firms. The latter have long sought an alternative to the traditional IPO process.

The proposal was welcomed by VC Bill Gurley after John Tuttle, Vice Chairman & Chief Commercial Officer at NYSE tweeted the news of the SEC’s decision.

No more hurdles

The new Primary Direct Floor Listing process does not need underwriters to price shares such as in a usual IPO.

Also missing are the marketing roadshows and share lockups. Best of all, the new route is much cheaper because investment banking fees are much lower than in an IPO.

However, in a telephonic interview with Reuters, Tuttle said: “We are not trying to displace the IPO. We are trying to create more options for companies and investors seeking to tap into the public markets.”

According to the FT, the new process also answers a long-standing grievance of venture capitalists regarding the pricing of IPOs. Often these are priced too inexpensively, resulting in a substantial gain on the listing. This opening gain or “pop” goes to new investors or speculators rather than the company.

The SEC’s remarks

In its order, the SEC quoted a commenter on the NYSE’s proposal. “Allowing for multiple pathways for private companies to achieve exchange listing would encourage more companies to participate in public equity markets. It would also provide investors a broader array of attractive investment opportunities.”

The SEC also noted the following advantages of  NYSE’s Primary Direct Floor Listing:

  • some investors may be able to purchase securities in the auction who might not otherwise receive an initial allocation in an underwritten offering
  • the opening auction provides for a different price discovery method for IPOs. This could result in more appropriate pricing for the offered shares, a potential benefit to existing and potential investors. (In a firm commitment underwritten offering, the offering price depends upon negotiations between the issuer and the underwriters for the offering)

The SEC said:

“The commission believes that the proposed rule change, by providing an opening process in which buy and sell orders are matched, in accordance with the proposed rules, to determine the offering price, may allow for efficiencies in the way IPOs are priced and allocated without sacrificing investor protection.”

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Source: https://dailyalts.com/venture-capital-vcs-and-startups-rejoice-the-nyse-has-an-alternative-to-ipos/

Private Equity

Beazy U.G. – HRB204648B – 01042023

Beazy is a rental platform for audiovisual equipment and spaces. You can think of it as AirBnB for photographers and filmmakers!

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” The Leapfunder Note is a sensible and attractive way to place capital in start-ups in the Netherlands “

” Diversification is important in angel investing. Leapfunder is a platform that allows angels to spread their investments. “

” Leapfunder investing allows you to become actively involved in a start-up, just as in classical angel investing, while taking all the hassle out of transaction execution “

” Leapfunder is ideal for investing smaller amounts in a start-up in the very early stages. Such investments can be a powerful addition to a portfolio “

” With Leapfunder you get a great opportunity to build up a diversified portfolio of start-up investments, often investors can play an active role in developing the company “

” When I saw the Leapfunder proposition I thought straight-away: this is what start-ups need. I am an entrepreneur and wish this system had been available when I started my company. “

Pieter ter Kuile

Investor

Wouter Kneepkens

Investor

Ronald Bazuin

Investor

Eric van der Maten

Investor

Eric van Gilst

Investor

Donald Res

Investor

Source: https://www.leapfunder.com/companies/177

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Private Equity

CVC to acquire RiverStone Europe for $750m

The deal with Canada’s Fairfax Financial Holdings to buy the run-off insurance services business is expected to close early next year

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CVC Capital Partners has agreed to buy run-off insurance services business RiverStone Europe from Canada’s Fairfax Financial Holdings for about $750m.

The seller would also be entitled to get as much as an additional $235.7m post-closing under a contingent value instrument, Fairfax said in a statement. The business will change its name to RiverStone International after the deal closes, expected early next year. CVC is investing in the company through its Strategic Opportunities Fund II, closed last year at at €4.6bn.

“As one of the largest global consolidators of non-life run-off insurance books, with a leading position in the UK and Lloyd’s market, embedded cash flows and a predictable financial profile, RiverStone Europe is ideally suited to CVC’s Strategic Opportunities platform, which specialises in backing established businesses in stable markets that have long term growth ambitions,” said Peter Rutland, managing partner and head of financial services at CVC.

OMERS, the pension plan for Ontario’s municipal employees, has also agreed to sell its interests in the company, the firm said in a statement. 

To contact the author of this story with feedback or news, email PEN Editorial

Source: https://www.penews.com/articles/cvc-to-acquire-riverstone-europe-for-750m-20201203

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Private Equity

Pennsylvania Pension details the costs of private equity investing

The pension system’s fund managers collected about $427m in fees and expenses last year

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Pennsylvania’s largest pension system estimated its private equity fund managers received about $427m in gains, fees and expenses from the plan’s investments last year, up 14% from $374m the previous year.

The state’s $60bn Public School Employees’ Retirement System said that the total for 2019 included $100m in management fees, $279m in carried interest, or the share of investment profits, and $48m of other fund expenses.

By comparison, the 2018 total included $114m in management fees, $214m in carried interest and $46m in other fund expenses last year, according to a presentation at a public meeting of the pension’s Board of Trustees.

The Pennsylvania pension system is among the few institutional investors that report fees and other costs associated with investing in alternative assets.

The system began tabulating and reporting the management fees and carried interest collected by its private-equity investment managers in 2019 as a way to increase transparency around its investments in the asset class.

“It’s been a pretty large effort to get it [carried interest] on a calendar-year basis, but we’re going to try to get it and update it every six months going forward,” James Grossman, the plan’s chief investment officer, told pension overseers at the meeting.

The pension system also broke out the amounts of carried interest received by managers of individual funds last year. The three highest earners were CVC Capital Partners’ CVC European Equity Partners V, at $25.3m; LLR Partners’ LLR Equity Partners IV LP, at $17.8m; and New Mountain Capital’s  New Mountain Partners IV LP, at $16.2m .

The system saved about $3.34m in annual management fees through a co-investment program during its most recent fiscal year, which ended 30 June, pension documents show. For the current year, the plan aims to increase the amount to about $6.7m.

Although the system provides more detail about investment expenses than most institutional investors, it is working on becoming even more transparent. Among other potential moves, it is considering hiring an outside firm to improve the clarity of the data it collects and reports.

Fund general partners, which manage the investments, typically charge limited partners a fixed fee, while other expenses accrue at the fund level. Only a handful of public pension systems, including those in California, provide details of fees charged and carried interest amounts collected by fund managers.

But there isn’t a uniform standard for reporting the fees and expenses, according to Charles Spiller, deputy chief investment officer, nontraditional investments for the system. The plan has relied on data investment adviser Hamilton Lane Inc. helped collect from audited financial statements and surveys of fund managers, Spiller said, a process that consumed almost 200 staff hours this year, system documents show.

Bringing on an outside firm to produce detailed fee statements could lead to greater fee savings, according to the documents. The firms being evaluated for such a role include Colmore AG, Novarca International  and XTP, the documents show.

Write to Preeti Singh at preeti.singh@wsj.com

From The Wall Street Journal

Source: https://www.penews.com/articles/pennsylvania-pension-details-the-costs-of-private-equity-investing-20201203

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