The Ledger
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Domain complexity prevents intermediaries from operating in the TRA market
“I would say there are no intermediaries in the space that we deal in as a function of a number of things. Domain expertise as well as the size of each underlying opportunity prevents many intermediaries from engaging in earnest on this space.”
TRAs are primarily created by private equity for their portfolio companies
“It's primarily done by private equity firms in the context of their portfolio companies, and it runs the gamut of industries from the likes of Bumble to GoDaddy all the way to Shake Shack, my personal favorite.”
Up-C TRAs originated from the 1980s Taubman Up-REIT structure
“This technology really came from the real estate world from the up REIT. The first up REIT was created in the 19 eighties via Taubman shopping centers, and subsequent to that T.R.A.s inherited that technology when corporations started going public.”
The 2021-2022 IPO/SPAC boom drove a surge in VC TRAs
“As a result of the flurry of both IPOs as well as SPACs in 21 and 22, there was a significant uplift in terms of number of TRAs created that were shared by both growth equity firms as well as venture capital firms”
The TRA market opportunity grew from $7B in 2017 to $30B
“In 2017, the market opportunity was, call it, seven billion dollars on the back of euphoric equity markets, and more importantly, adoption by private equity sponsors. That number is now closer to thirty billion dollars.”
Between 25 and 40 companies go public with TRAs annually
“So on an annual basis, there are, call it, 25 to 40 IPOs with TRAs, depending on the IPO market.”
TRAs sit as unsecured obligations behind debt but ahead of equity
“It sits behind indebtedness, so it's an unsecured obligation ahead of preferred equity as well as common.”
Companies typically pay 85% of realized TRA tax savings to holders
“The company would file its corporate tax filing if and when they filed that taxes and they are able to utilize the deductions that a TRA assets are able to deliver them, they would then pay 85% of those savings to the holder of the TRA.”