Markets In Action

Vivint Solar IPO Shines Light on Role of Capital Markets

It’s a long way from door-to-door sales to an initial public offering (IPO). But it’s a path Todd Pederson now finds himself walking after working in sales for a pest control company more than two decades ago.


With a $5,000 loan from his mother, Pederson hired 10 of his friends to sell pest control services door-to-door over the summer — unwittingly laying the groundwork for the company he would later found, Vivint, Inc., which is today one of the nation’s leading home security and automation service providers.


But the Utah-based company hasn’t slowed in the pursuit of new opportunities. With the October 1, 2014, IPO of Vivint Solar, a spin-off from the parent company that sells and services residential solar panels to help homeowners lower their energy bills, the company has opened up a new frontier for growth in an emerging industry.


Founded in 2011, the residential solar panel provider leveraged its parent company’s existing customer base and door-to-door sales force to expand rapidly — Vivint Solar now commands nine percent of the residential solar market after just three years, with operations in seven states.


They’re not stopping there. The company leadership has big plans for continued expansion, as Vivint Solar CEO Greg Butterfield recently explained. (Butterfield was named CEO of Vivint Solar in September 2013; Pederson remains CEO of the parent company, Vivint, Inc., which will continue to be privately held).


“[Vivint Solar] is not a startup that’s going to come and go,” Butterfield told the Pacific Business News in July regarding the company’s local presence.


With a workforce of 2,288 employees, according to its IPO filing with the Securities and Exchange Commission, Vivint Solar now offers services to around 22,000 homes. Access to a larger pool of capital will allow further growth — which can mean more employees at every stage of production, coverage of more geographic areas and more solar installations in homes around the nation.


As a privately-held company, Vivint Solar determined the company could only grow so far; to take things to the next level would require going public through an IPO. By selling stock in the company to the wider public — 20.6 million shares — the firm has access to a much wider and deeper reservoir of capital. Thanks to the capital markets, Vivint Solar may be much less likely to “come and go” as many other startups have, in Butterfield’s words.


Going public allows individual investors and institutional investors, such as mutual funds, retirement funds and state and local pension funds, the ability to have an ownership stake in the company.


Public offerings can also signal confidence in the direction of the economy. The Wall Street Journaland The Economist have written of the new “IPO boom” as more entrepreneurs and management teams seek to expand their companies through equity financing. As the economy recovers, it’s a reassuring sign of optimism for the future.


Vivint Solar’s IPO is the second significant solar IPO in the last few years; competitor SolarCity went public in 2012. Industry watchers suggest that a successful IPO for Vivint Solar will send a signal that solar is a maturing industry — yet another follow-on benefit of this public offering.


“The solar industry wants the [Vivint Solar] IPO to succeed, mostly because another strong round of capital injection will support the retail investment thesis that solar represents,” Yann Brandt writes at Cleantechnica. “Having two comparable publicly traded solar companies is good to have in the limelight, as more homeowners look to add solar to their homes.”


While we may enjoy watching a new public company take flight on the day of its IPO, keep in mind that it’s only the beginning because that’s when the work begins to build a business with staying power.


The Vivint Solar story is a case study not only in far-sighted entrepreneurialism, but also of how a business makes the leap from a closely held company to a growing, sustainable enterprise with a listing on the public exchanges. And that’s a leap that can only happen with the access to capital and financial innovation that markets make possible.