Is Private Equity Going Public?
Riverstone Holdings, a US-based energy-focused private equity firm, has just announced launching a £1.5 billion closed-ended investment fund, called Riverstone Energy, to be floated on the main market of the London Stock Exchange by end of October. The company confirms that it has secured binding commitments of £500 million from five cornerstone investors who will buy 50 million shares at £10 each plus an additional £50 million of Riverstone Holdings' own capital.
The new fund is expected to invest across the global energy sector, focusing on the exploration, production, and midstream segments. Sir Robert Wilson, the former chairman of BG Group will be its chairman and members of the board will include Jim Hackett, former chief executive of Anadarko Petroleum; Lord Browne, former chief executive of BP who is now a Partner at Riverstone Holdings; as well as Riverstone's co-founders David Leuschen and Pierre Lapeyre Jr.
Typically, private equity groups have previously only raised capital from large institutions, sovereign wealth funds, and wealthy families. However, we are now seeing an increasing trend in which a number of private equity firms are looking to access the public markets targeting retail investors. In essence, we are seeing the emergence of publicly-quoted private equity businesses. Is this reflective of their increasing difficulty in raising sufficient funds? Will this trend continue?
Even Riverstone Energy's chairman, Sir Robert Wilson, recognises the apparent contradiction and unusual juxtaposition as according to Bloomberg he is quoted as saying "this provides public investors a chance to invest alongside private equity investors in a way that's both unusual and, I hope, highly rewarding". He further adds that going to the public has been an ambition of Riverstone partners for some time in order to establish a permanent capital vehicle.
This trend is quite interesting as we normally see private equity firms taking public firms private, away from the scrutiny of the public markets, to execute their turnaround plans and restructurings. Now, we are seeing the opposite whereby they are willing to endure this public scrutiny in order to ensure they continue to have adequate access to capital. The IPO of KKR's Private Equity Investor fund in 2006 and the partial floating of The Blackstone Group in 2007 pioneered the trend. The question now is, how well will these listed funds perform and are there more public private equity funds to emerge?