What to Know about the Vacasa IPO (VCSA)

Vacasa, a veteran property management company, founded in 2009 by Eric Breon made its Nasdaq debut on December 7, 2021, after a deal with SPAC TPG Pace Solutions.

The Portland-based company was valued at roughly $4.5 billion.

Despite going public, only about 10% of the company's shares are publicly traded. Existing shareholders of Vacasa, including founder Eric Breon, are holding onto their equity. CNBC reports that Vacasa CEO Matt Roberts said existing investors would not sell shares.

What is SPAC?

SPAC stands for “Special Purpose Acquisition Company”. A SPAC deal is a type of initial public offering (IPO) in which the shell company buys or merges with a private business to take it public. As opposed to IPOs, which can take a while and focus investors' attention too much on actual profits, SPACs are supposed to be faster.

How and Why is Vacasa taking the SPAC route?

Vacasa is going this route by merging with TPG Pace Solutions — a special purpose acquisition company that will become publicly traded, too.

The company is bypassing the traditional IPO route in favor of an alternative route. This may be due to the many regulations to go through when trying to go public the traditional way, or it could be that the company simply wants to take its time in order to ensure everything goes smoothly.

Who is TPG?

TPG Pace Holdings is a leading global alternative asset firm founded in San Francisco in 1992 with $108 billion of assets under management and investment and operational teams in 12 offices globally. TPG invests across five multi-product platforms: Capital, Growth, Impact, Real Estate, and Market Solutions. TPG aims to build dynamic products and options for its clients while also instituting discipline and operational excellence across the investment strategy and performance of its portfolio.

Vacasa and TPG Pace Solutions talk about their perspectives

Business Wire reported that Vacasa's CEO Matt Roberts said:

“The closing of our Business Combination and imminent public listing marks another important milestone not only for Vacasa and its employees, but our homeowners, guests, channel partners, and the broader vacation rental industry."

Furthermore, Roberts stated, “Funds from the over $340 million of gross proceeds provided by the transaction will enable us to help accelerate our execution on our long-term business plan of further enhancing our technology capabilities and products, adding more homes to our platform, and improving the vacation rental experience for all stakeholders.”

The Chairman of TPG Pace Solutions, Karl Peterson, commented stating:

“TPG Pace Solutions was attracted to Vacasa for its proven, scaled business model, favorable secular tailwinds, and experienced leadership team. The Vacasa team has executed exceptionally well, with its previously updated full-year 2021 revenue guidance more than $100 million higher than the initial revenue target provided when we announced the proposed transaction in July,”

He also added to the comment stating, “I look forward to continuing to partner with Vacasa as a member of the Board of Directors.”

Following the successful completion of the Business Combination, Barbara Messing and Karl Peterson will join Vacasa's Board of Directors. They each possess extensive experience in the travel industry, as well as experience operating and advising public companies.

Barbara Messing currently serves as Chief Marketing and People Experience Officer at Roblox and is a board member of Overstock, where she has helped both tech-enabled platforms navigate various stages of growth. Previously, she held various positions at Walmart U.S., Tripadvisor, and Hotwire.com, including SVP & Chief Marketing Officer.

TPG Senior Partner Karl Petersen is the Founder and Managing Partner of TPG Pace Group, and he is the Co-Founder of Hotwire.com, where he served as president and CEO. A board member of Playa Hotels and Resorts, he is chairman of Sabre and Accel Entertainment.

What is Vacasa's Forward Plan?

In their announcement made in summer 2021 that it was going public, Vacasa forecasted they would gain up to $485 million in cash proceeds to grow the business. However, the deal only generated $340 million in gross proceeds, much less than the forecasted $485 million. According to their chief financial officer, Jamie Cohen, the money raised from the merger was sufficient.

“We’re really well-capitalized now and have plenty of money on the balance sheet to go and invest for continued growth,” she said.

Vacasa will now roll out the money to continue doing what it’s doing, namely, investing in technology and adding new properties to its portfolio.

Vacasa estimates, within the United States, there are over five million vacation rentals, of which only 35,000 are on the Vacasa platform which amounts to just 1% market penetration.

According to the Vacasa acquisition strategy, they either add properties by seeking out clients directly or by acquiring the portfolios of smaller property management companies. As of 2021 during the first nine months, Vacasa has purchased more than 200 such property managers.

Vacasa’s Growth Goals

In order to reach the company's growth goals, the company uses a "portfolio strategy," in which data is analyzed to determine which markets to enter and which local property management companies to acquire. Over the years 160 property management companies have been acquired by Vacasa, including big names such as Wyndham and Turnkey.

In lieu of pursuing properties one by one, Vacasa seeks to enter markets where it can quickly offer a wide range of properties while the goal is set to dominate the vacation rental market one destination at a time.

Vacasa anticipates breaking even by 2023 (EBITDA break-even)

In the wake of the pandemic, one-fifth of people stayed in vacation rentals for the first time, according to Vacasa.

There is also the rise in remote work, and this is causing people to take more time off and take longer vacations. Short-term rentals continue to consolidate, and Vacasa is relying on that to succeed.

As reported on Markets Insider, Vacasa expects revenue of $1 billion in 2022 and $1.3 billion in 2023 based on factors like higher occupancy and gross bookings.

The business expects to break even by the end of the fiscal year of 2022/23.

How did Vacasa list on the stock market?

Vacasa began trading on the Nasdaq Stock Market on December 7th 2021, under the ticking symbol “VCSA.”

According to news sources, “Vacasa’s debut into the stock market was rocky, with the stock dropping more than 10% Tuesday, to $9.84”

What does this mean for investors?

Generally speaking, it's unclear what a SPAC deal will bring, but it's considered riskier than going public in the traditional way. However, a successful public offering can bring big rewards.

AirDNA reports, revenue in the short-term rental sector reached $3.8 billion in September, a 30% increase over 2019. That is a tremendous bonus for the industry in terms of its growth and what the potential actually may be in 2022 and in the years to come.

Therefore according to Matt Roberts, Vacasa plans to triple the dollars spent on technology and to add more properties to the platform. Globally, there are over 20 million rental homes, which means there is massive growth potential, and Vacasa has made it clear that it will be on their agenda for future expansion.

It is a well-known fact that this tech-savvy company has a knack for picking the right markets to enter and the right buildings to lease. Through its proprietary technology, the company maps out real-estate opportunities and potential RevPar. Similarly, Vacasa wants its investors to be aware of its "proprietary data and artificial intelligence engine", which drives "intelligent supply acquisition". There is a reason to believe that the company has a competitive edge in that it makes smart decisions and that its processes are hard to replicate.

Industry experts shared their perspectives

"The Vacasa IPO, along with the successful IPO of Airbnb last year, further gives our industry the publicity it deserves. It's no longer alternative accommodation. It's hospitality. Short term and vacation rentals are here to stay for years to come, and the Vacasa IPO is just the beginning." - Marcus Radar, CEO Hostaway

“The short-term rental industry has been professionalizing over the last few years. We have been seeing and expect to see further consolidation in the industry as consumer demand and expectations for vacation rentals grow,” Further adding to the statement “By 2025, Phocuswright projects that larger hosts and property managers managing 50+ units will account for over half of short-term rental gross bookings. Vacasa is one of the largest players in this market and going public will allow them to fund continued growth.” - Charuta Fadnis, Senior Vice President of Research and Product Strategy, Phocuswright