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‘Vista Controls Us’: 5 Warnings From Inside Datto’s IPO

Ahead of its IPO, Datto is setting the stage for a potential conflict between investors and its private equity owner forewarning that ‘its interests may conflict with ours or yours in the future.’

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‘Vista Controls Us, And Its Interests May Conflict With Ours Or Yours In The Future.’

Datto’s rivals for wallet share in the MSP market are also owned by private equity, however ConnectWise, Solarwind, and Kaseya, are adamant that the folks who own the company, are hands off when it comes to running the business.

Not so with Datto.

In its S-1 filing, Norwalk, Conn.-based Datto says not only is it run by private equity, but it warns investors that with 72.2 percent of its stock, Vista will have a giant-sized say over the new public company, if an IPO is successful.

Vista will control the vote of all matters submitted to a vote of our board of directors, or our Board, or shareholders, which will enable it to control the election of the members of the Board and all other corporate decisions,” Datto warns in its risks section. “In addition, our bylaws will provide that Vista will have the right to designate the Chairman of the Board for so long as Vista beneficially owns at least 30% or more of the voting power of the then outstanding shares of our capital stock then entitled to vote generally in the election of directors.”

And private equity’s authority will stretch beyond the board room, Datto said. It warns potential investors that Vista will hold sway over business plans, management, and corporate policy as well.

Vista will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers, decisions on whether to raise future capital and amending our charter and bylaws, which govern the rights attached to our common stock,” the warning reads.

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‘No Additional Borrowing Capacity Under Our Revolving Credit Facility’

Datto said it has maxed out its credit under its current loans, leaving it with “no additional borrowing capacity” and it hopes to use the IPO as a way to secure an additional 200 million.

“Concurrently with or shortly after the completion of this offering, we expect to enter into a new revolving credit facility, or the Post-IPO Credit Facility, which we expect to provide $200.0 million of borrowing capacity.

Vista Equity saddled Datto with a $520 million term loan and a $35 million revolving line of credit after it acquired the company in December 2017. In April of this year, shortly before it would announce layoffs as a result of COVID, the company refinanced its debt through “a syndicate of lenders” this time borrowing $600 million.

“As of June 30, 2020, we had total current and long-term indebtedness outstanding of $591.6 million, including $544.5 million outstanding under our term loan facility, or our Term Loan Facility, and $47.1 million of borrowings outstanding under our $50.0 million revolving credit facility, or our Revolving Credit Facility, and together with the Term Loan Facility, our Credit Facilities. As of June 30, 2020, we had no additional borrowing capacity under our Revolving Credit Facility, which includes $2.9 million in outstanding letters of credit.”

The IPO filing cost the company $8.4 million with the bulk of that – some $3.2 million spent on legal fees, the filing states.

 
 
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