IPO Stocks to Sell Now: KKR Real Estate Finance Trust Inc (KREF)
If you bought shares in the June 2010 IPO of KKR & Co. L.P. (NYSE:KKR), as of July 11, 2017, those shares would be worth $18.97, an annual return of 8.8%. Over the same period, you have achieved a 12% annual return by investing in the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).
Henry Kravis and George Roberts, the guys made famous by the book Barbarians at the Gate, want you to take a piece of their commercial real estate loan business. KKR started KKR Real Estate Finance Trust Inc (NYSE:KREF) with $400 million of its own money in October 2014 along with $438.1 million from third-party investors.
The positive aspect of this offering is that there’s no dilution. The pre-IPO shareholders put in $838 million and own 80% of the shares post-IPO—KKR itself owns 44.2% of KREF post-IPO—while the $220.4 million through new investors own the remaining 20%, making all investors equal. By comparison, the Snap Inc (NYSE:SNAP) IPO saw new investors contribute 50.4% of the equity for 12.5% of the shares for 83.2% dilution.
The negative of this offering is that KKR is adept at sucking fees out of almost any investment — it is private equity, after all — so you can sure it will win whether KREF is a smashing success or not. IPOs are back, so KKR is trying to strike while the iron’s hot. I’d strongly suggest you take a pass.