Oct 25, 2021
On April 26th, 2017 Robert Alpert and Clark Webb invested a combined $4.654mm of cash in exchange for a 48% interest in a prepackaged reorganization of Active Power, Inc. As of October 22, 2021, that stake is worth much more. In today’s episode, we speak with David Waters of Alluvial Capital and open it up to podcast listeners to go over this incredible transformation as well as future prospects for the company now known as P10 Holdings. David Waters is the Founder and Managing Member of Alluvial Capital. Since inception in 2014, David has been able to achieve great returns by investing in mostly unloved and under appreciated OTC stocks. David is also our first returning podcast guest. Congrats to David.
*This is an audio replay of a conference call held on Wednesday, October 20th, 2021.
*To listen to our first interview with David earlier this year please check out Episode 3 here.
(01:28) David Waters introduction to Alluvial Capital and P10 Holdings. P10 is a Diversified Alternative Asset Manager making its debut on the NYSE. Robert Alpert and Clark Webb invested roughly $5 million in 2017. The company was then known as Active Power and had over $400 million in NOLs. First transaction was RCP Advisors, which is a lower middle market private equity shop. P10 has since done multiple transactions and used the management fees as revenue streams to offset NOLs.
(08:44) Going over strategic roadmap of P10. Company should have a lot more detail out in public markets now that it is an SEC Filer.
(09:50) Audience question regarding P10 and the tax credit space.
(11:23) P10 Value Proposition to acquisition targets. Great platform company that allows acquiring partner to diversify and be part of a larger company. Acquiring company retains “Carry” and is able to leverage P10’s expertise in a number of areas.
(14:16) David talks about the roughly $400 million in Net Operating Losses and how P10 is using it to grow in a tax-efficient manner.
(17:22) Good discussion regarding valuation and how to compare P10 to other publicly traded Alternative Asset Managers. What is a fair valuation? 4-5% on an earnings yield basis; 30x’s recurring cash flow.
(22:21) We discuss why P10 chose to do an IPO when it was already listed on the OTC stock market. Also go over the capital structure and Globalscape transaction.
(26:50) A versus B shares in IPO. Voting and Non-Voting. How to think about it as it relates to index buying, etc.
(30:12) Audience question from Doug M. David, how do you think P10 is pricing acquisitions? David responds with some historical acquisition multiples at the company and hints at a potential strategy going forward.
(32:33) Doug M. goes over why he made his initial investment in P10 Holdings.
(35:59) David talks about comparable Asset Management companies like Aberdeen and KKR. He also talks about how there aren’t any perfect comparable companies due to the fee structure, which could provide additional alignment with partner firms.
(40:16) Discussion over EBITDA multiples and a potential range of 55-60% margin per management guidance.
(44:19) More conversations about IPO dynamics, pricing range and float. Investment Bank coverage, etc.
(48:34) What is the next P10? David goes over his investment criteria and focus on management quality.