One of the year's most talked about initial public offerings (IPOs) will debut in three weeks and there's a group of shareholders that most do not know about that are set to reap big returns from the Latitude Financial's listing.
The financing company is scheduled to hit the bourse on October 18th with a market valuation of around $3.5 billion to $4 billion (on an enterprise value basis), but what most do not know is the early investors in Latitude that stand to double or triple their money.
These are family offices controlled by some of the wealthiest Australians in Melbourne and Sydney. According to my investment banking sources, these family offices are clients of the old Deutsche Private Wealth business, which was sold and became Escala Partners.
The hidden Deutsche Bank-Escala Partners connection
US private equity group KKR, Deutsche and Verde bought Latitude in 2015 from GE and Deutsche sold part of its stake to half a dozen prominent family offices for around $50 million to $75 million through Escala Partners.
It's believed that Deutsche Australia did that to prove to its German masters that Latitude was a good initial investment (meaning that Deutsche sold part of its stake at a profit).
These family offices will control more than 15% of Latitude's $1.2 billion free float, and while there's no word on who these are, I won't be surprised to find family offices linked to Peter Ivany, Kerry Stokes or Bob Oatley on the list – although I admit I am guessing here.
The good news for investors coming in on the IPO is that shares owned by these family offices are likely to be under escrow for two years.
IPOs outperforming in 2019
If IPOs in 2019 is anything to go by, Latitude's share price could outperform on listing as around three quarters of new listings are trading above their offer price and the average gain of all listings this year is nearly 70%, according to IPOwatch.com.au.
The best performing IPOs for the year include the Uniti Group Ltd (ASX: UWL) share price, the Osteopore Ltd (ASX: OSX) share price and the Next Science Ltd (ASX: NXS) share price.
While the size of Latitude's float is relatively large, it's still behind other recent big name floats like the Coles Group Ltd (ASX: ASX COL) spin-off from Wesfarmers Ltd (ASX: WES), Viva Energy Group Ltd (ASX: VEA) and UNIBALWEST/IDR UNRESTR (ASX: URW).
Another interesting fact, total IPOs on the ASX are likely to be down on 2018, which saw 132 newly minted public companies that raised around $10 billion in capital. Based on current estimates, we are likely to see fewer than 100 listings for 2019.
