Last Wednesday, 15 Female x Finance members attended a masterclass hosted by our partner Teslin, a public equity investor. During this masterclass, the members learned all about public equity and how to make a positive impact through an investment case. Couldn’t attend the event? No worries, in this article we will explain the difference between a public and private equity investor, tell you what aspects you need to take into account before investing, and show you what such an investment case looks like.

Teslin Capital Management.

Teslin is a public equity investor, which means they invest in publicly listed companies or pre-IPO companies. The company has several funds; a Dutch fund, a German fund, a European small-cap fund, and a smaller fund for real estate investments. So, how do they choose which companies to invest in? Teslin makes a fundamental analysis before the investment is made. In this analysis, Teslin takes several factors into account that might influence the success and impact of a company in the long run:

  • ESG (Environmental, Social, Governance)
  • Market
  • Strategy
  • Financials

Public vs private equity.

But, what exactly is the difference between a public and private equity investor? The words say it all. Public equity means that you only invest in companies that are listed on a stock exchange. So what does this mean for the investors, public vs private?

(1) Investing in public companies, means all the information you use is public and all large investments you make can go public. While private equity deals are often behind closed doors, public equity investments tend to be more visible. (2) Investing in public companies, also means there is more regulation. Insider trading for example, is not done. (3) Stock prices of public companies are continuous and transparant. (4) Unlike private equity, in public equity, all the numbers are available in the yearly financial reports since a public company is obligated to publish these financial statements. (5) Public companies tend to have many shareholders, while private companies have limited. (6) Lastly, public companies are also available for retail investors, whereas private ones are not.

“Public equity is a combination of working with numbers and giving strategic advice. You invest for the long haul. When you take up the role of an active shareholder through substantial stakes, you can really make an impact in the company.”

The investment case.

What is it like to work in public equity? How better to find out than during an investment case. The main question: How to decide whether to invest or not to invest? Let’s have a look.

As an investor you want to invest in a company, however you want to make sure if this is the right move. There are several things to look at, of which the most important are:

The market: It is important to know in which market the business operates in. Who are there competitors? How big is their current marketshare? What are the main market trends? And so on..

The business: If you know more about the market, let’s dive into the business of the target company. How do they differentiate themselves? Do they have a patent? How sustainable is their product? And where do they want to be in x years?

Stakeholders: Also important to look at are the stakeholders.  Is the management capable enough? To what extent is the company dependent on the management? How many large shareholders are there currently? Are all stakeholders on the same page?

Financials: And last but not least, the financials. What is the current debt structure of the company? Given the market growth and expected increase of market share of the company, how will the revenue and profit change over time?

And then the main question: How to make impact as an investor? More and more companies are focusing on sustainability, or ESG. Do you think this is an important aspect when considering whether to invest or not? Incorporate this in your analysis. How sustainable is this company and is this in line with our other portfolio companies? How likely is it that you can influence the decisions of the management to create a more sustainable future together?

These are only a few examples of things you look at when deciding to invest or not to invest. What other questions would you ask? Think of it, this is basically what you do as an investor. Ask questions, do you research and get the answers you need to invest or not.

Coot Uelen – intern at Teslin.

You might have seen our instagram post already. Coot Uelen interns at Teslin right now. We asked her what it is like to work in public equity.

Coot: “You make a strategic impact on the companies you have invested in. For example, doing an ESG analysis and making suggestions to the company’s management on how to improve their ESG strategy. ESG stands for Environmental, Social, and Governance factors to evaluate companies and countries on how far advanced they are with sustainability. As an intern, I’m working on different investment cases for which I do research and analysis on the market and financials. Moreover, I’ve also done several ESG analyses and joined company meetings to discuss those.”

“In public equity, you work with listed companies and you are in control of your investment decisions, just like in private equity. I really enjoy that.” – Coot Uelen, intern at Teslin

Written by: Julia Waardenburg