The IPO Buzz: Driving Past the Train Wreck

What’s more, this week opens with a frisson. Chrysler, an old name from yesteryear, plans to rejoin the New York Stock Exchange and start trading on Monday. It is not an IPO.

 

The new name is Fiat Chrysler Automobiles N.V., previously known as Fiat S.p.A. In January, the Fiat board of directors reorganized the company, creating Fiat Chrysler Automobiles (FCA). Under the reorganization, Fiat S.p.A. shareholders would receive one FCA common share for each Fiat S.p.A. share held. The new FCA common shares are to be listed on the New York Stock Exchange with an additional listing on the Mercato Telematico Azionario in Milan.

 

This is the reason why you didn’t get a phone call from your friendly stockbroker offering you shares in a Chrysler IPO.

 

The direction and strength of the U.S. stock market set the tone for the IPO calendar. By Friday’s closing bell, the IPO playing field looked a lot like TV’s popular “Survivor” near the season finale.

 

To re-cap: The stock market closed on Friday, Oct. 10, with the Dow Jones Industrial Average at 16,544.10, down 2.74 percent for the week and, worth noting, down 0.2 percent for the year. The Nasdaq Composite Index ended on Friday at 4,276.24, down 4.45 percent for the week, but up 2.39 percent for the year. The S&P 500 finished Friday’s regular session at 1,906.13, down 3.14 percent for the week, but up 3.13 percent for the year. And the IPO calendar struggled.

 

Of the nine IPOs that came to market, one was priced above its original filing range, four were priced within range and four were priced below range. Their opening-day report card read: Four up, five down. The average opening-day gain was 2.16 percent for all nine deals.

 

However, the calendar produced one huge flop. It was MOL Global (MOLG), based in Kuala Lumpur, Malaysia. The company believes it is the largest e-payment provider for online goods and services in Southeast Asia. The IPO of 13.5 million American Depositary Shares was priced at $12.50, well below the original filing of 19.5 million ADS at $12.50 to $14.50 each. MOL Global closed its opening day on Thursday at $8.14, down 34.9 percent from its initial offering price. That was the biggest opening-day loss since January 2000, according to available records, and some say the sharpest opening-day loss ever.

 

This brings us to this week’s calendar, which is highlighted by an energy limited partnership and five pharmaceutical IPOs.

 

Dominion Midstream Partners, LP (DM – proposed), based in Richmond, Virginia, is a limited partnership formed to own all of the outstanding preferred equity interests in Dominion Cove Point LNG, which owns liquefied natural gas import, storage, regasification and transportation assets. The Cove Point LNG Facility, located on the Chesapeake Bay in Maryland, is generating significant revenue and earnings from annual reservation payments under regasification, storage and transportation contracts with a portfolio of creditworthy counterparties, including affiliates of BP, Royal Dutch Shell and Statoil. The partnership plans to pay a quarterly cash distribution of 17.5 cents per common unit, or 70 cents annually, to yield 3.5 percent, based on the mid-point of its offering price of $19 to $21 per common unit.

For more information, please click here: Dominion Midstream Partners, LP)

 

Five of this week’s IPOs fall under the heading of pharmaceuticals, which is good news/bad news. The good news is they keep coming to market.

 

Since Labor Day, 32 IPOs have been priced, according to the U.S. Securities and Exchange Commission filings. Of that number, eight – or 25 percent – have been pharmaceuticals, not to be confused with biotechs.

 

The bad news is that as a group, pharmaceutical IPOs have been laggards during their opening day of trading.  Six of the eight finished as losers. The mean average opening-day result was a loss of 2.66 percent. Note: Watch the final pricings. The two winners were priced above their original filing ranges.

 

A passing observation on the pharma and biotech industries: They are different. The pharmaceuticals, which develop drugs, have the Securities and Exchange Commission Standard Industrial Classification (SIC) code number of 2834. The biotechs, which deal with cells and genetics, have an SIC number of 2836. Worth repeating: These are different industries.

 

Looking into the week of Oct. 20, 2014, the calendar has three deals with bankers planning to raise about $300 million. A week ago, the calendar for the week of Oct. 13, 2014, also had just three deals looking to raise $300 million. Now it’s up to nine IPOs expecting to raise $2 billion. And depending upon market conditions, names could pop onto the calendar by the time that Monday, Oct. 20th, rolls around.

 

Stay tuned.