PowerSchool Holdings Inc. debuts today on the New York Stock Exchange as a publicly traded company, potentially raising up to $907.9 million if fully subscribed, less fees and commissions, in what could be the region’s largest initial public offering.
PowerSchool (NYSE: PWSC) will use the funds to pay down debt and expand, with the currency of a publicly traded stock giving the company more options to grow through acquisitions.
“It opens financial flexibility for us,” CEO Hardeep Gulati told the Business Journal. Gulati will ring the opening bell at the exchange today.
Since 2016, Folsom-based PowerSchool has made 12 acquisitions that have given it a broad platform for helping K-12 schools and universities operate, manage and track everything from admissions, attendance and homework to offering online platforms, student counseling, career counseling and teacher support.
The company has been doing investor roadshow presentations, mostly virtually, since it announced the IPO April 6, led by traditional investment bank underwriters Goldman Sachs & Co. LLC, Barclays, Credit Suisse and UBS Investment Bank.
Ahead of the IPO, PowerSchool attracted interest from the Canada Pension Plan Investment Board and Select Equity Group LP, who were considering acting as anchor investors and buying up to $350 million in shares of common stock at the IPO price.
“Getting anchors is very exciting, because you now have a proof point that other investors can build on,” Gulati said, adding that those investors have been doing diligence on the company over the past two months.
“It is a big validation, and it makes the IPO more successful,” he said.
Select Equity is a New York-based investor with $30 billion in assets under management. The Canadian Pension Plan is a Toronto-based fund with $497 billion in Canadian dollars in assets under management, or $394.7 billion in U.S. dollars.
“We are organically growing but we are also growing by expanding the platform,” Gulati said, adding that much of the expansion of the platform has been through its acquisitions.
The IPO will help the company continue to fund acquisitions and to grow organically, he said.
“One of the things that (the IPO) does is that it really validates the PowerSchool story,” Gulati said, adding that while the company has built a technology platform with many features and functions, the company is a relatively unknown commodity in the tech world.
“Being public makes that story a little more visible and it helps us get the right mindshare with our market and customers,” he said.
Being publicly traded validates the company on a national level, not only because it will be tracked by analysts but because its books will be fully audited and transparent to the public.
“Being a public company benefits our employees and our customers,” Gulati said. “They know we are not going anywhere.”
The employees will benefit from stock options, which in turn can help to attract and retain talent. Customers benefit because the company will have more ways to finance new technology development or more acquisitions to add functionality to the suite of services.
PowerSchool filed registration documents last week to offer about 39.5 million shares at a price range of $18 to $20 per share. That translates to an IPO valued between $719.5 million and $789.5 million. At the midpoint of the share price range, which is $19 per share, PowerSchool estimates it will raise $750.5 million with the sale of 39.5 million shares, with net proceeds of $697.8 million after deducting underwriting expenses and commissions.
The underwriters also have the ability to purchase up to 5.9 million additional shares at the IPO price, which at $20 per share would be $118 million, within 30 days of the offering, according to the prospectus.
The company has registered 45.39 million shares, which at the $20 share price and fully subscribed would be a maximum offering value of $907.9 million, less costs, according to the registration statement.
Earlier this year, PowerSchool bought two education platforms from software company Hobsons for $320 million. It got a bridge loan for that acquisition, which carries interest of 3.12%. That loan and a previous loan of $365 million, with an interest rate of 6.9%, will be paid off by the IPO proceeds.
The pandemic accelerated PowerSchool’s efforts to get more schools and students online. The company’s Schoology platform had just over 2 million students online at the onset of the pandemic. At the time of its offering in April, it had more than 15 million students online.
PowerSchool employs more than 2,905 people across the country, and it has several hundred employees based at its Folsom headquarters, but they have been working remotely over the past year.
PowerSchool is a portfolio company of Austin, Texas-based private equity firm Vista Equity Partners and Toronto investment firm Onex Corp. At least two representatives from each firm are proposed to become board members of the public company.
