Gladstone Companies Begins U.S. IPO Effort

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A quick overview of Gladstone companies

The Gladstone Companies (GC) has filed a request to raise an undisclosed amount in an IPO of its Class A common stock, according to an S-1 registration statement.

The company provides access to alternative assets for investors in the United States.

When we know more about the details of the IPO, I will provide an update.


Gladstone, based in McLean, Va., was founded to invest client funds in various debt and equity securities of lower-middle-market private companies operating in the United States.

Management is led by Founder, Chairman, President and Chief Executive Officer David Gladstone, who has been with the company since its inception in 2009 and was previously Chairman of American Capital Ltd., a US-listed leveraged buyout fund. stock exchange and a mezzanine debt financing company.

The company’s main investment offerings include:

  • (GAIN) – business investment

  • (GLAD) – investment in debt securities

  • (BON) – Office and Industrial REIT

  • (LAND) – Natural Resources REIT

Gladstone has reserved an investment at fair market value of $107 million as of June 30, 2021 from investors including David Gladstone.

Gladstone – Customer Acquisition

The company generates revenue through the management fees it charges on the funds it manages.

Management said: “For the year ended June 30, 2021 and the six months ended December 31, 2021, approximately 41.6% and 25.6%, respectively, of our total revenue was comprised of base management fees. For the years ended June 30, 2019, 2020 and 2021, base management fees averaged 38.3% of our total revenue.”

Spending on salaries and benefits as a percentage of total revenue has fluctuated as revenue has fluctuated, as shown in the numbers below:

Salaries and benefits

Expenses vs income



Six months. Completed December 31, 2021


AF June 30, 2021


AF June 30, 2020



The payroll and benefits efficiency rate, defined as the number of dollars of incremental new revenue generated by each dollar spent on payroll and benefits, increased to 0.5x during the most recent reporting period, as shown in the table below:

Salaries and benefits

Efficiency rate



Six months. Completed December 31, 2021


AF June 30, 2021


(Source – SEC)

Gladstone Market and Competition

According to a 2020 market research report by ResearchAndMarkets, the global wealth management market was valued at approximately $487 billion in 2019 and is initially expected to contract due to the Covid-19 pandemic and eventually rebound to $585 billion. billion by 2023.

This represents a projected CAGR of 9.4% from 2021 to 2023.

The main drivers of this expected growth are the increase in the population of retirees, the growing wealth of high net worth individuals and the growing demand for alternative investments offering adequate return opportunities.

Additionally, aspects that could negatively impact the wealth management industry include the continued dampening effects of the Covid-19 pandemic, the rise of Fintech companies seeking to automate services, and the growing use of passing investment techniques.

North America was the largest region, accounting for 53.7% of the total market in 2019, followed by Western Europe, Asia-Pacific and others. Notably, the Western Europe region is expected to experience the fastest growth, followed closely by the Asia-Pacific region.

The wealth management market is very fragmented, “with a large number of small players”.

Major competitors or other industry participants include:

Financial performance of Gladstone companies

The company’s recent financial results can be summarized as follows:

Below are the relevant financial results from the company’s registration statement:

Total revenue


Total revenue

% deviation from before

Six months. Completed December 31, 2021



AF June 30, 2021



AF June 30, 2020


Operating profit (loss)


Operating profit (loss)

Operating margin

Six months. Completed December 31, 2021



AF June 30, 2021



AF June 30, 2020



Comprehensive income (loss)


Comprehensive income (loss)

The net margin

Six months. Completed December 31, 2021



AF June 30, 2021



AF June 30, 2020



Operating cash flow


Operating cash flow

Six months. Completed December 31, 2021


AF June 30, 2021


AF June 30, 2020


(Glossary of terms)

(Source – SEC)

As of June 30, 2021, Gladstone had $50.7 million in cash and $33.5 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2021 was $13.3 million.

Gladstone Companies IPO Details

Gladstone intends to raise an undisclosed amount in gross proceeds from an IPO of its Class A common stock.

Class A common shareholders will be entitled to one vote per share and Class B shareholders will receive ten votes per share.

The S&P 500 index no longer admits companies with multiple classes of shares in its index.

No existing shareholders have expressed interest in purchasing shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

[i] provide capital to existing Gladstone Funds and future Gladstone Funds, including through partnership interests; [ii] provide additional capital for the acquisition of Gladstone as part of its initial business combination; [iii] use proceeds for working capital to supplement our existing line of credit; and [iv] for other general corporate purposes.

We will make investments in existing Gladstone Funds and future Gladstone Funds only to the extent that we are not required to register as an investment company under the 1940 Act. repurchase or repurchase shares of our share capital outstanding prior to this offer or to compensate our officers or directors.

(Source – SEC)

The presentation by management of the company’s roadshow is not available.

With respect to ongoing legal proceedings, management indicates that the firm is not currently subject to any significant legal or arbitration proceedings.

The sole listed bookrunner of the IPO is EF Hutton.

Gladstone IPO Commentary

GC seeks US public investment to provide capital for its various investment vehicles and for corporate working capital.

The company’s financial statements showed fluctuating revenue growth, an increase in operating profit and net profit, and a recent change in cash used in operations.

Free cash flow for the twelve months ended June 30, 2021 was $13.3 million.

Salary and benefits expenses expressed as a percentage of total revenue varied with fluctuations in revenue; its salary and benefits efficiency rate increased to 0.5x in the last reporting period.

The company currently expects to pay a monthly dividend on its Class A shares, but has not estimated that dividend at the time of the current filing.

The market opportunity for wealth management services is significant and expected to grow significantly as global liquidity remains high, so the business has strong industry growth momentum ahead of it.

EF Hutton is the lead underwriter and IPOs conducted by the company over the past 12 months have generated a negative average return (39.3%) since their IPO. This is an underperformance for all major underwriters over the period.

The main risk to the company’s outlook is the current rising interest rate environment which has created high market volatility and lower valuations in some investment areas, particularly growth-oriented investments.

When we know more about management’s pricing and valuation assumptions for the IPO, I will provide a final opinion.

Expected IPO pricing date: to be announced.

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