Stepstone Group Inc. current report, 18 September 2020

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StepStone Group Inc. Form 8-K Summary

Business Context and Reporting Period

StepStone Group Inc. filed this Form 8-K on September 18, 2020, to report the closing of its initial public offering and related corporate, equity, governance and organizational actions. The company’s Class A common stock trades on Nasdaq under the symbol STEP. The company identified itself as an emerging growth company.

Key Financial and Capital Markets Metrics

  • The company completed an IPO of 20,125,000 shares of Class A common stock at $18.00 per share, implying gross offering proceeds of approximately $362.25 million before underwriting discounts, commissions and offering expenses.
  • The filing does not provide net IPO proceeds, revenue, profit, margins, operating cash flow, free cash flow, debt, liquidity balances or other period financial results.
  • The company issued 65,578,831 shares of Class B common stock to certain StepStone Group LP partners for nominal consideration.
  • The company issued 9,112,500 shares of Class A common stock to certain partnership-interest holders in exchange for partnership interests.

Material Changes and Corporate Actions

  • In connection with the IPO, the company entered into an amended and restated partnership agreement, two tax receivable agreements, an exchange agreement, a registration rights agreement and a stockholders agreement.
  • The company amended and restated its certificate of incorporation and bylaws, effective September 18, 2020.
  • The board was expanded to include Scott Hart, Jose Fernandez, Michael McCabe, Thomas Keck, Mark Maruszewski, Steven Mitchell, Anne Raymond and Robert Waldo, in addition to Monte Brem and David Hoffmeister.
  • David Hoffmeister and Anne Raymond qualified as independent directors for board and committee purposes. The filing also established Audit, Compensation, and Nominating and Corporate Governance committees.
  • The board adopted the 2020 Long-Term Incentive Plan. Initially, 5,000,000 shares of Class A common stock were reserved for awards, with potential annual increases of up to 5% of outstanding capital stock from 2021 through 2030, subject to board discretion.

Outlook, Risks, Contingencies and Unusual Items

  • The filing provides no earnings guidance, operating outlook or management forecast.
  • The tax receivable agreements may create future payment obligations to specified equity holders in connection with certain tax benefits arising from exchanges and the company’s reorganization; the filing text does not provide the potential amount of those obligations.
  • The Class B share issuance and the exchange and stockholders agreements establish the post-IPO ownership and governance framework and may affect voting control, future exchanges into Class A common stock and potential dilution.
  • The equity incentive plan may result in future share issuance and dilution, including through its potential annual share-reserve increases.
  • The filing states that the new directors had no undisclosed arrangements or reportable material interests in connection with their selection.

Important Facts for Investors to Verify

  1. Verify the IPO’s net proceeds after underwriting discounts, commissions and expenses, which are not provided in this filing.
  2. Review the tax receivable agreements for the timing, amount and priority of potential payments to existing equity holders.
  3. Review the partnership, exchange and stockholders agreements for ownership, voting rights, exchange mechanics and control provisions.
  4. Confirm the fully diluted share count, including Class A and Class B shares, partnership interests and awards available under the incentive plan.
  5. Review subsequent SEC filings for financial results, liquidity, debt, guidance and any changes to governance or ownership.