Great Hill Partners doesn’t appear to be breaking even on its three-year investment in YogaWorks Inc.
YogaWorks went public on Aug. 11 in its second attempt at an IPO. The shares closed down 12 percent, or 65 cents, at $4.85. They traded as low as $4.16. Having closed below the $5.50 IPO price, YogaWorks is considered a broken deal.
YogaWorks in July postponed its first try at an IPO, citing market conditions, MarketWatch reported. On Thursday, YogaWorks raised $40.2 million when it sold 7.3 million shares at $5.50 each. The company had planned to sell 5 million shares at $12 to $14 each.
Great Hill, a Boston private equity firm, acquired the Culver City, California, yoga-studio operator in July 2014 for about $45 million, the Wall Street Journal reported. Great Hill used its fifth fund, which raised $1.1 billion in 2015, to invest.
PE firms typically do not sell shares in an IPO. Before the IPO, Great Hill owned 8.9 million shares — 99.9 percent — of the company. The firm doesn’t appear to be selling any stock.
In fact, Great Hill said it wants to buy about 2.72 million shares, or $15 million, of YogaWorks common, the SEC filing dated Aug. 11 said. If it does buy more stock, Great Hill will control about 72 percent of the common, the SEC filing said. (This falls to 67 percent if the underwriters exercise their option to buy another 1.1 million shares.)
At $4.50 a share, Great Hill’s stake of 8.9 million shares is valued at $40.1 million. This is below the $45 million it invested. If it does buy the additional stock, Great Hill’s investment in YogaWorks jumps to $60 million. The company has not paid any cash dividends since it was sold to Great Hill in 2014, the filing said.
Great Hill and YogaWorks could not immediately be reached for comment.
Yoga studios have attracted private equity interest. L Catterton is an investor in Purre Barre and CorePower Yoga. WJ Partners has also backed Purre Barre.
YogaWorks opened its first studio in 1987. It currently operates 50 studios in six cities, including Los Angeles, New York and Boston. The company added 17 studios in 2015 through four acquisitions: Be Yoga, Yoga Tree, BackBay Yoga Studio and Charm City Yoga.
Revenue for YogaWorks dropped nearly 7 percent to about $14 million for the three months ended March 31, the SEC filing said. Losses widened to $2.6 million.
The company said it planned to use proceeds from the IPO to pay debt and to fund acquisitions of yoga studios. The company said it has entered into letters of intent or is in late-stage negotiations to buy as many as 20 additional studios.
Action Item: Call YogaWorks CEO Rosanna McCollough at +1 310-664-6470
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