The Carlyle Group debuted as a public company Wednesday at $22 per share, valuing the firm at $6.7 billion, significantly lower than the about $18 billion valuation implied by a 2007 investment in the firm by Abu Dhabi’s sovereign wealth fund.
Despite setting a conservative pricing for its shares, the initial share price still came in lower than the expected range of $23 to $25. This follows another recent private equity IPO, that of Oaktree Capital Management, which priced at the bottom of its range at $43 per share and raised $387 million, selling only 8.84 million shares despite expectations that it would move around 11.3 million shares.
The firm's shares — 30.5 million of them — began trading on the Nasdaq on Thursday after representatives from Junior Achievement, an organisation involved in boosting educational opportunities for young people, rang the opening bell for the Nasdaq on behalf of Carlyle. Shares hovered around the $22 range in early trading Thursday.
Carlyle’s value has changed over the decade. In 2001, the firm sold a 5.5 percent stake to the California Public Employees’ Retirement System for about $175 million, valuing the franchise at roughly $3.2 billion.
The firm raised $671 million in the initial public offering, proceeds of which will be used for debt repayment, growth initiatives, acquisitions and strategic investments and to fund capital commitments to its funds.
Carlyle has spent the past few years expanding its platform from private equity into other asset classes, including credit investments, real estate and even buying a major LP, AlpInvest. Private equity firms that go public need to show shareholders diversified streams of revenue beyond the long-term promise of payouts in private equity funds.
Earlier this year, Carlyle dropped a plan to force future unitholders to go through private arbitration to resolve grievances, which would bar unitholders from filing class-action lawsuits. The firm had sought to enforce private arbitration as a way to save money and time from the costly lawsuits, but the US Securities and Exchange Commission and some US politicians pressured Carlyle to back away from the plan.
Also ahead of the IPO, Carlyle paid off one of its outside stakeholders, Mubadala, which loaned $500 million to the firm in 2010, money which Carlyle used to pay its owners, David Rubenstein, Daniel D’Aniello and William Conway Jr., $398.5 million. Carlyle paid back Mubadala using capital from a revolving credit facility.
Carlyle debuts at low end of price range
The firm's initial public offering debuted at $22 per share, below its low-end expectation of $23 per share. The firm raised $671 million in the offering.