In a hot market for wealth managers, AssetMark’s IPO rises

Nearly three years after buying AssetMark Financial Holdings Inc, Huatai Securities has taken the wealth manager public.

Shares of AssetMark surged 18.82 percent, or $4.14, in late afternoon trading Thursday to $26.14.

AssetMark raised $275 million late Wednesday when it priced its IPO at 12.5 million shares at $22 each, above its $19 to $21 price range. Underwriters on the deal, including JP Morgan and Goldman Sachs, have the option to buy another 6.25 million shares at the offer price (the green shoe).

AssetMark provides wealth management and technology to independent financial advisers and their clients. The investment adviser had more than $49 billion in assets on its platform as of Mar. 31. AssetMark’s revenue rose 23 percent to $363.6 million in 2018, while net income fell 62 percent to $37.4 million, according to SEC filings. The company employs more than 600 people.

Huatai Securities acquired AssetMark in late 2016 for $780 million. Aquiline Capital Partners and Genstar Capital were the sellers. AssetMark appears to have made only one acquisition since it was acquired by Huatai. The Concord, California, company bought Global Financial Private Capital in April for about $36 million, the S-1 said.

Huatai has received some of its money back. In fourth quarter, AssetMark made a one-time cash distribution of $234 million to its parent, the filing said. This included a $76 million dividend and $158 million return of capital.

Huatai holds the largest stake in AssetMark. The broker owned 59.3 million shares of AssetMark, or 89.7 percent, before the offering. It is selling 8.125 million shares, including 6.25 million that are part of the green shoe. At $22 a share, Huatai received $178.75 million from the sale of stock.

The broker’s stake will fall to 51.2 million shares, or 70.7 percent, after the IPO. At $26.14 a share, Huatai’s holding is valued at about $1.33 billion.

The Huatai IPO comes as wealth managers have emerged as a hot sector for private equity investments. In May, Goldman Sachs agreed to buy United Capital Financial Partners for $750 million, or around 17x to 18x, Buyouts reported.

Also, in May, Reverence Capital Partners agreed to acquire 75 percent of Advisor Group. The sellers, Lightyear Capital and PSP Investments, retained 25 percent. The deal was valued at more than $2 billion, Buyouts reported.

Currently, Genstar has put Mercer Advisors up for sale, Buyouts reported July 10. Lightyear is also seeking a buyer for Wealth Enhancement Group, Buyouts said.

Action Item: For more information, read AssetMark’s July 10 regulatory filing here.