Of all the winners and losers from last week's spate of IPOs, one private equity firm, Summit Partners, stands to reap particularly sweet gains.
Klaviyo, a marketing and automation company, is one of three IPOs, including Arm Holdings and Instacart, that were expected to jumpstart the IPO market this past month.
Klaviyo turned in a respectable performance, but its debut was far from a moon shot. After raising $345.2 million, Klaviyo’s stock rose 9.2% on Sept. 20. The shares have since remained above its $30 IPO price and closed Tuesday at $34.11, up about 14% from its offer price. Arm jumped 25% during its first day on Sept 14 but has since lost much of those gains. (The stock ended Tuesday at $53.52, up about 5% from its $51 IPO price.) Instacart, meanwhile, rose 12% during its debut on Sept. 19. Its stock ended Tuesday at $29.89, making Instacart the first of the trio to close below its IPO price, which was $30.
Klaviyo’s success so far has made billionaires out of its founders: Andrew Bialecki, CEO, and Ed Hallen, chief product officer. Neither executive sold stock in the IPO. Bialecki’s stake is currently worth about $3.4 billion, while Hallen’s holding is valued at roughly $1.12 billion Monday.
But private equity firm Summit Partners did own a big chunk of Klaviyo, and sold a slice at the IPO. Summit is making more than seven times its money with its investment, according to Fortune’s calculations.
Founded in 1984, Summit is a Boston PE firm that currently manages more than $37 billion in capital. Summit is known for its growth equity investments and typically provides from $10 million to $500 million per company, according to the firm’s website. The firm invests across three sectors: technology, healthcare, and life sciences, as well as growth products and services. In 2021, Summit raised $8.35 billion for its eleventh U.S. growth equity fund.
Private equity firms often use the IPO market, as well as mergers, to sell their stakes in companies. About 400 companies went public in 2021, a record year for new issues. More than one-fourth, or 106, of those IPOs had significant backing from private equity, according to Renaissance Capital, a provider of pre-IPO research that manages two IPO-focused ETFs (NYSE: IPO, IPOS). The poor performance of IPOs from 2021 is a major reason, along with interest rates and inflation, that new issues have largely been on pause since then. Just 13%, or 51, IPOs from 2021 are trading above their offer price, Renaissance said. Summit did back three IPOs from 2021: a.k.a. Brands, Solo Brands, and EngageSmart. All three are trading below their IPO prices.
Summit's first investment in Klaviyo occurred in April 2019 when it provided $150 million to the company. In late 2020, Summit put in another $100 million when it acquired 6,611,948 Klaviyo shares at $15.12413 each, according to a regulatory filing.
The following year, from May to July of 2021, Summit invested again. It bought 22,464 Klaviyo shares at a price of roughly $33 each, spending $749,881. In all Summit invested nearly $251 million. The firm doesn’t appear to have received any dividends, according to the SEC filing.
Summit offloaded about 4.9 million shares in the Klaviyo IPO, making about $147.5 million. The sale reduced Summit’s Series B stake to about 49.5 million or 21.5%. Summit’s remaining holding, comprising 49.5 million Series B shares, is valued at $1.69 billion (at $34.11 a share). Summit’s gains from Klaviyo come to about $1.83 billion ($1.69 billion plus the $147.5 million from the stock sale). This means Summit is making more than 7 times its money, even though most of its gains are still on paper.
Summit and Klaviyo declined to comment.
See you tomorrow,
Luisa Beltran
Twitter: @LuisaRBeltran
Email: luisa.beltran@fortune.com
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