Getting In On Big Initial Public Offerings: TBOW, BX, GS, NLSN
Delays, Holdovers, and Cutting Prices Frustrate IPO Business.
I recently wrote a piece on the Hong Kong Exchange dropping its fees to lure in new listings. Prada SpA is apparently going to give it a try. The Italian fashion house, for the time being, has passed on a dual listing in Milan. And so it goes in the IPO business. Three Chinese IPO’s were suppose to take off and begin trading last week. One made it, Trunkbow International Holdings (NASDAQ:TBOW), and two others, China Century Dragon Media (to be CDM) and Zheng Hui Industry (to be ZHIC) have stalled out for a few days.
The Trunkbow International Holdings IPO offered approximately $30 million at $6 a share. The stock is currently trading a notch below $5. China Century will offer $9 million at $6.50 and Zheng Hui will offer $15 million at around $8.50.
As the tables turn from going public to going private, and then going public again, in the last 250 days, three dozen private equity-backed companies have filed to go public.
Last month, Nielsen Holdings (NASDAQ:NLSN), the media company owned by a group of private equity firms since 2006, raised about $1.5 billion to pay down debt. The Nielsen offering has paved the way for other large private equity owned businesses to go public.
One of the biggest IPO’s in the offing is Kinder Morgan. Why now for Kinder? Based on expected valuations, Goldman Sachs (NYSE:GS) and private equity fund the Carlyle Group will have paper profits of approximately three times their original investments. That’s why now. Carlyle is the second biggest equity fund in the world.
Kinder Morgan, an oil-and-gas pipeline company, taken private in 2007, filed for an initial public offering to raise as much as $2.3 billion, which would be the largest buyout initial public offering on record. And another giant IPO in the works is HCA, the nation’s biggest hospital chain.
Private equity giant the Blackstone Group (NYSE:BX) recently posted its best quarterly earnings in nearly four years and said that its primary business of buying up companies was on the “Upswing.” BX is sitting on approximately $16.5 billion of cash.
In the mid 1990 glory days of IPO’s, the started trading, the underwriters getting 25-30% discounts would sell right away, making their money, and buying volumes would catapult stocks to remarkable valuations, all in one day. That isn’t the case any longer.
A lot of companies use the IPO structure to pay off debt or in a more and more common scenario, equity funds wait until a company has moved through bankruptcy, and have no debt, and then pull it out, dust it off, and get it listed. Buyer beware.
