Funds that Won Demystifying Tax Receivable Agreements l Saish Setty & Parallaxes Capital l Ep 29
Jan 24, 2024
Saish Setty, a Princeton and Harvard Law alum, has been shaking up the financial scene at Parallaxes Capital since 2021. In this engaging conversation, he dives into the world of Tax Receivable Agreements (TRAs) and their growing significance in corporate finance, particularly during IPOs. Saish discusses the valuation complexities of tax assets and the innovative strategies his firm employs to provide liquidity. He also addresses risks involved with TRAs and emphasizes the future potential of this nascent asset class, making it a must-listen for finance enthusiasts.
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What are TRAs?
- Tax receivable agreements (TRAs) create a contractual right to share tax benefits from specific assets.
- They often arise in IPOs, where pre-IPO owners receive benefits based on generated tax savings.
TRAs Don't Lower IPO Valuation
- TRAs often don't decrease a company's IPO market valuation despite significant payouts.
- Public markets may disregard tax assets value, focusing on EBITDA or revenue multiples.
Patience Is Key in TRAs
- Be patient and persistent when entering a nascent asset class like TRAs.
- Understand that deal cycles can be very long, sometimes taking years to close.