Eric Lefkofsky
Tempus plans to raise about $400 million in its initial public offering, which would value the genetic-testing and analytics company at about $6 billion.
The Chicago-based company expects to sell 11.1 million shares at $35 to $37 apiece, generating about $361 million after fees, according to an updated prospectus. If underwriters exercise an over-allotment for more shares, the company will sell 12.8 million shares, which would bring in $417 million.
At that price, it would be the largest local venture-backed IPO since 2020, when health insurance marketplace GoHealth raised about $900 million at a valuation of $6.7 billion. (GoHealth quickly declined and is valued at $230 million.)
Tempus is selling shares, but founder Eric Lefkofsky is not giving up control. Lefkofsky, who previously took online-deal company Groupon public, owns 39% of Tempus common stock but all of its super-voting Class B stock, which get 30 votes per share.
After the IPO, Lefkofsky will hold 30% of the common stock but still have 65% of the voting power. Lefkofsky did the same thing with Groupon, which raised $700 million in a 2011 transaction that valued the company at $12.7 billion. In the case of Groupon, the super-voting shares that Lefkofsky held with co-founders Andrew Mason and Brad Keywell, expired after five years. The dual-class shares at Tempus have no such expiration date.
The prospectus warns investors that the dual-class voting structure “will limit your ability to influence the outcome of important decisions."
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Corporate-governance watchdogs frown upon dual-class shares, but investors and stock indexes seem to have gotten used to the idea, thanks in part to the successes of Google and Facebook IPOs. Between 2017 and 2023 at least 1 in 5 IPOs in the U.S. have had dual-class structures, according to research by Jay Ritter, a University of Florida finance professor. Among tech IPOs, it’s closer to 40%.
“I’m a fan of one share, one vote,” Ritter says. “But dual-class stocks have worked out OK for public market investors. On average, they’ve done better than single-class stocks.
“Not every company can use dual-class shares without investor concerns,” he says, noting “dual-class shares don’t work well when top management owns very little stock.”
The dual-class stock isn’t the only warning sign in the Tempus prospectus.
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The company, which lost $298 million last year on $532 million in sales, paid out $5.6 million in dividends, including $5.3 million to Lefkofsky. Since the company was founded, it paid out $38.1 million in cash dividends.
“This is poor signaling to potential IPO investors,” says Timothy Loughran, a finance professor at the University of Notre Dame. “It just has a poor appearance for the firm's corporate governance. “
If Tempus succeeds in selling shares at the top end of its price range, it will be valued at $6.2 billion, which is less than its most recent valuation in fundraising from private investors of $8.1 billion. It’s a reflection of just how heady the private markets were when venture capitalists were fighting hedge funds to get in on the next “unicorn” deal. But it’s also a reality check for investors.
This story first appeared in Crain's Chicago Business.
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