Vacasa, a vacation rental company headquartered in Boise and Portland, announced on July 29 it was going public with a $400 million transaction, partnering with TPG Pace Solutions. That gives it a valuation of $4.5 billion, with $485 million for growth and technology investments.
“Vacation rentals were cast into the spotlight this past year, as consumer preference made a clear and lasting shift to whole home rentals and second home sales skyrocketed,” the company said in a statement.
The deal is expected to close later this year; the combined company is expected to be publicly traded under the symbol VCSA. Vacasa’s existing investors expect to roll 100% of their equity and retain 88% ownership following transaction close, the company said.
Previously, the biggest Idaho deal was when Albertsons went public in 2020 for $1.7 billion.
Vacasa produces technology intended to help property owners rent and maintain vacation homes. The company said it has more than 100 channel partners, including Airbnb — which itself went public in 2020 for a valuation of $47 billion — for a total of over 30,000 vacation homes, including over 600 in Idaho.
According to Vacasa, the company has $1.6 billion in projected gross bookings with over $750 million in projected 2021 revenue from 5 million nights sold.
Vacasa CEO Matt Roberts told CNBC that he planned to triple his investments in technology and staff. It isn’t clear how much would be spent in Idaho.
“There are zero plans to reduce Vacasa’s employee count as a result of this deal,” said Allison Ferré, Vacasa corporate communications manager, in an email message. “Since the capital will be used to further scale Vacasa, particularly when it comes to product and technology, it’s likely that new employment opportunities will open up as part of that growth.” However, she couldn’t provide specifics.
Some Idaho companies that have exited — particularly Cradlepoint — have been noted for being generous with stock options that shared the wealth among employees. Ferré said she couldn’t comment on Idaho employees’ stock options.
“Vacasa has shown very strong execution at a pretty scary time and they continue to grow,” said Bill Benjamin, managing partner of Galena Capital. “They’ve leveraged their knowledge of the industry and that has put them in a great spot.”
About TPG Pace Solutions
TPG Pace Solutions, based in the Cayman Islands, was founded in April. It is a Special Purpose Acquisition Company (SPAC) from TPG, which thus far has created seven such companies. It raised $285 million in its Initial Public Offering (IPO).
TPG describes itself as a global alternative asset firm founded in 1992 with $96 billion of assets under management.
So what is a SPAC, anyway?
Vacasa’s decision to go public wasn’t a surprise — the company has hired several executives recently for that purpose — but the way it’s doing so is thus far uncommon in Idaho, though it’s been increasingly popular throughout the United States.
The way a SPAC works is a company interested in taking other companies public creates a new company with no intrinsic value, and takes that public through an IPO to raise funds, typically $10 per share. A SPAC generally has a particular focus, and it must spend the money raised within two years, or return it to the investors.
When the SPAC finds a company it wants to take public, it buys it, investing some or all of the money it raised, giving investors a share of the purchased company.
The advantage of a SPAC over a traditional IPO is that it’s faster, requires less oversight and can be publicized more. The disadvantage of a SPAC is that because of these factors, the purchased company might not end up worth as much as originally thought.
When asked why Vacasa had chosen to use the SPAC method rather than a traditional IPO, Vacasa representatives referred to a broadcast interview quoting Roberts as saying, “It was about who we got to work with in terms of the process. The end result is the same. We’ll bring on great capital to fuel the growth in the business and further develop our technology.”
The last time a SPAC was used in Idaho was the sale of Boise Cascade’s paper division, in 2007. However, SPACs have become increasingly popular in the past year due to market volatility around COVID-19.
But some financial experts are expressing concern about the increasing number of SPACs. In particular, because so many have to spend their funding within two years, some experts worry SPACs will invest in marginal companies to avoid having to give the money back.
“It can be an efficient way for companies to enter the public capital markets,” Benjamin said. “It provides capital and return that’s attractive to investors.” However, investors need to be cautious, he warned.
According to SPAC Research, 1,462 SPACs have raised a total of $417.9 billion.
Editor’s note: This article has been updated as of Aug. 4 with some comments from Vacasa representatives.