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AssetMark IPO seen as boon for financial services

Jeff Benjamin | InvestmentNews

Investors pounce, driving shares of the TAMP up 19% in first-day trading

The initial public stock offering by AssetMark Financial Holdings (AMK) is being described by market watchers as well-executed success that will pave the way for other financial service industry companies to access the public equity markets.

The Concord, Calif.-based turnkey asset management platform, which has $56 billion under management, began trading Thursday morning after selling 12.5 million shares of stock after the market closed Wednesday evening.

The IPO share price of $22, which raised $275 million, was above the stated target range of $19 to $21 per share and valued the 23-year-old TAMP at more than $1.6 billion.

In midday trading, the stock was up nearly 19% to more than $26 per share, which compares to a slightly negative day for the broader S&P 500 Index.

“This was just about a perfectly executed IPO,” said Kathleen Smith, principal at Renaissance Capital and manager of the Renaissance IPO ETF (IPO).

Comparing the AssetMark offering to its publicly traded peers SEI Investments (SEIC) and Envestnet (ENV), Ms. Smith said the offering was “priced attractively, at a discount to peers of between 13% and 15%.”

Gary Zyla, AssetMark’s chief financial officer, credited the success of the stock sale to a “great reception on the road show,” where “investors really understood what we’re trying to do.”

“The whole experience has been very satisfying,” Mr. Zyla said. “Two things that really resonated with investors were the idea that we’re in an enormous and growing market of independent financial advice, and nobody has real market share yet.”

Josef Schuster, manager of the First Trust IPO ETF (FPX), said the strength of the AssetMark offering bodes well for the sector and for IPOs in general.

“The strong debut of the stock today underlines investors’ confidence about the potential for strong growth prospects of the firm and industry,” he said.

According to Renaissance Capital, even following a lackluster first two months of the year, 2019 is now on track to be the best year for IPOs since 2014. The $39 billion raised in the IPO market so far this year is 32% above what was raised over the same period last year, Ms. Smith said.

In the financial services arena, both ProSight Specialty Insurance and Intercorp Financial Services have filed and are on track to go public this year. In addition, both Robinhood Markets and Social Finance have registered confidential IPO filings that are not yet available to the public, Ms. Smith said.

Mr. Zyla said $125 million of the proceeds from the IPO will be used to pay down the company’s $250 million worth of long-term debt. Most of the remaining proceeds will be used to reduce Huatai Securities’ 98% ownership stake to 70%, he said.

Huatai, a Chinese company, paid $770 million for the TAMP in 2016.

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