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Cushman & Wakefield IPO: Here’s Everything You Need To Know

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Global commercial real estate services firm Cushman & Wakefield launched its initial public offering late Thursday morning, selling 45 million shares for $17 a piece in hopes of raising $765M.  

Wall Street New York Stock Exchange

Here is everything you need to know about the company’s public offering: 

A Solid Opening

C&W began trading on a high note, pricing 5.9% above its IPO price on the New York Stock Exchange under the ticker CWK. MarketWatch reports the first trade came in at $18 for 3.5 million shares around 10:18 a.m. The $765M goal values the company at around $3.1B, not including debt. 

Cushman is the second commercial brokerage to go public in the past year. Competitor Newmark Group went public in December in an IPO that fell short of expectations due to concerns regarding poor IPO timing and pricing confusion. Newmark planned to sell 30 million shares at a price tag of $19 to $22/share, but when investor reactions came in lukewarm, parent company BGC Partners Inc. lowered the offering size to 20 million shares at a cost of $14 to $15. 

Smart Pricing

When Cushman filed its paperwork with the Securities and Exchange Commission in June, the company initially sought to sell about $810M worth of shares at $16 to $18 a pop. Prior to that, whispers circulated that the brokerage giant was seeking to raise $1B through an IPO that would value the company at around $5B. In the end the real estate services giant elected to price shares at the midpoint of its range — a good call seeing that shares were up 3.24% to $17.58 10 minutes before noon Thursday.

Third-Largest Player In The Space

Publicly traded commercial brokerages have enjoyed soaring share values in the beginning of this year thanks to the global expansion of their underlying business models, which boosted commission and property management fees. Cushman & Wakefield is the third-largest global player in the commercial brokerage space, trailing only CBRE and JLL. Global giants CBRE, JLL, Colliers International and Newmark Knight Frank have market caps totaling $16.3B, $7.7B, $3.2B and $2.2B, respectively. Should Cushman & Wakefield hit its $765M goal, the company would remain the third-largest commercial brokerage in the country.  

High Debt Levels, No Dividends

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Though the offering is pacing well, it is not all good news for the real estate firm. C&W is laden in debt and has reported net losses the past few quarters, all of which could factor into the launch. As of March 31, C&W had about $3B in debt, exceeding the debt levels at both CBRE and JLL. The company plans to use capital raised through the IPO to pay off some of its debt, in addition to paying off a $460.4M loan set to mature in 2020. 

"Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences,” the company wrote in its filing. “For example, it could: make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under such instruments.”

In 2017, C&W reported a net loss of $221M for the full year. In the first quarter of this year C&W took a net loss of $92M. Revenues for 2017 came in at $6.92B, roughly half of CBRE’s $14.2B and less than JLL’s $7.9B in revenue during the same period, according to the Wall Street Journal.

The company will not hand out dividends for ordinary shares at present, saying instead that it will use all of its future earnings growth to operate and grow its business. Though not the first company to withhold dividends, MarketWatch reports this could prove worrisome for investors considering the aged length of the cycle and the inevitable downturn that could stifle share price growth. 

A Last-Minute Deal

Ahead of Cushman & Wakefield’s IPO, Chinese residential developer China Vanke Co. grabbed a 4.9% stake in the company for about $175M. The deal valued C&W at around $3.9B, according to Commercial Observer. Morgan Stanley, JP Morgan Chase & Co., Goldman Sachs and UBS underwrote the transaction, which includes a 30-day option to purchase 6.75 million additional shares. 

Ownership Model

The Chicago-based brokerage, founded in 1917, is owned by an investment group under the TPG umbrella. The TPG affiliate acquired C&W for about $3.5B in 2015, merging the firm with peers DTZ and Cassidy Turley. The company’s principals are expected to retain control of the company and will have voting power, making the brokerage a “controlled company” that essentially will not have to adhere to certain governance requirements, MarketWatch reports.  

Cushman & Wakefield has about 48,000 employees on its roster and operated from 400 offices in 70 countries last year.