Vista Equity Partners has executed dozens of exits over the past two decades during its rise to prominence in the private equity industry. This week, though, marks the first time that one of the firm's portfolio companies has conducted an IPO, per PitchBook data.
The pioneering business in question is Ping Identity, a Denver-based developer of secure-access and authentication technology that went public on the NYSE on Thursday, pricing its offering at $15 per share to raise $187.5 million and establish an initial market cap of about $1.16 billion. Ping's stock was up to $20.11 per share by market close, representing a first-day pop of 34%. That initial $15 pricing was right in the middle of the company's anticipated range of $14 to $16 per share.
Vista has backed Ping since 2016, when it bought the business for $600 million from a group of prior VC backers that included Draper Fisher Jurvetson, General Catalyst and Ten Eleven Ventures. Private equity giant KKR was another former investor, having led a $35 million round in 2014 that proved to be Ping's final funding before its acquisition by Vista. Vista held a 97.2% pre-IPO stake in Ping and maintains an 81.6% interest after the listing, a figure that could dip to 79.6% if the offering's underwriters fully exercise their options.
Ping's listing is Vista's 36th exit since the start of 2010, according to PitchBook data, but every one of those prior deals had been a secondary buyout, merger or corporate acquisition. Over that same span, IPOs have typically accounted for anywhere between 3% and 6% of all exits on an annual basis across the whole of the US private equity sector, so Vista's aversion to public offerings perhaps isn't all that extraordinary. But it does mean that, for now at least, Ping is one of a kind.
While IPOs are still accounting for a very small percentage of all exits, PE firms are embracing public offerings this year for some of their most highly valued portfolio companies. In 2Q, the combined value of PE-backed IPOs in the US reached $21.8 billion, per PitchBook's 3Q US PE Breakdown, the highest quarterly figure in five years.
Ping's offering continues an action-packed past year at Vista, one of the first private equity firms to find success by investing exclusively in the software space. Vista reportedly closed its latest flagship fund on $16 billion earlier this month, its largest pool of capital ever. This year, the firm has finalized four different software deals worth $1 billion or more. In May, Vista founder Robert Smith made national headlines for pledging to pay off the student debt for the entire 2019 graduating class at Morehouse College. And last October, Vista completed its largest exit ever, selling Marketo to Adobe for $4.75 billion, barely two years after Vista had purchased the marketing software company for $1.8 billion.
Vista has also been in the news for reasons it would probably prefer to avoid. Last week, the firm was reportedly sued by a former director at Solera, one of its portfolio companies, who alleged that Vista had attempted to pressure the Solera board to purchase another Vista-backed company at an above-market price. Solera is a Texas-based creator of software for auto dealerships that Vista purchased for $6.5 billion in 2016—just a few months, in fact, before the firm acquired Ping Identity. (Vista did not respond to a request for comment.)
Ping's IPO comes amid an unprecedented flood of highly valued tech companies going from the private to the public market. Ping is PE-backed, while names like Zoom Video Communications, PagerDuty and Datadog were all VC-backed listings, but there are similarities between Ping and some of the younger software startups that have also gone public this year.
Most notable among them might be that Ping is rapidly growing its revenue yet is still losing money. Revenue jumped from $172.5 million in 2017 to $201.6 million in 2018, and with $112.9 million in 1H 2019 revenue, it's on pace for another leap this year. But after logging nearly $19 million in profit during 2017, Ping registered a net loss of $13.4 million last year and a loss of $3.1 million in 1H 2019.
One sure sign of Ping's PE ownership is the fact that it's carrying a nine-figure debt load, just over $240 million. The company plans to use the vast majority of the proceeds from this week's listing to pay down that figure, according to its IPO prospectus.
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