The IPO Buzz: An IPO Ticket to Ride

Let’s take a look.

 

Santander Consumer USA Holdings (SC – proposed) is a Dallas-based consumer finance company offering subprime loans on vehicle financing and unsecured consumer lending products. The company originates loans through franchised automotive dealers for Chrysler, Ford, General Motors and Toyota in conjunction with the sale of new and used vehicles to retail consumers. It has active relationships with over 14,000 such dealers throughout the United States. In February 2013, it entered into a 10-year agreement with Chrysler Group to originate private-label loans and leases under the Chrysler Capital brand (“Chrysler Capital”) to facilitate Chrysler vehicle retail sales. Formed in 1995, Santander has about 3,900 employees.

 

Underwriters plan to offer 65.2 million shares at $22 to $24 each to raise $1.5 billion. (Note: Selling shareholders plan to sell all 65.2 million shares in the offering.) The deal is expected to be priced Wednesday evening to trade Thursday morning on the New York Stock Exchange. The global coordinators and joint book-running managers are: Citigroup and J.P. Morgan. The joint-lead managers are: BofA Merrill Lynch, Deutsche Bank Securities, Santander, Barclays, Goldman Sachs, Morgan Stanley, RBC Capital Markets, BMO Capital Markets, Credit Suisse, UBS Investment Bank and Wells Fargo Securities. The co-managers are: KKR, Sandler O’Neill + Partners, Stephens and LOYAL3 Securities.

 

 

But there are other IPOs on the calendar. They are Care.com (CRCM – proposed) and Rice Energy (RICE – proposed). And the IPO handicappers are saying Care.com is “the pick of the week.” Let’s take a look.

 

Care.com is a Waltham, Massachusetts-based online marketplace for finding and managing family care for more than 9.5 million members in 16 countries. The company helps families address their lifecycle of care needs, such as child care, senior care, special needs care and other non-medical family care, including pet care, tutoring and housekeeping. The company also helps caregivers find full-time and part-time employment opportunities. Care.com was founded in 2006. It has about 543 employees.

 

Underwriters plan to offer 5.35 million shares at $14 to $16 each to raise $80.3 million. The deal is expected to be priced Thursday evening to trade Friday morning on the New York Stock Exchange. The joint-lead managers are: Morgan Stanley, BofA Merrill Lynch and J.P. Morgan. The co-managers are: Allen & Company and Stifel.

 

 

Rice Energy a Canonsburg, Pennsylvania-based independent natural gas and oil company engaged in the acquisition, exploration and development of natural gas and oil properties in the Appalachian Basin. Formed in 2013, Rice Energy has about 134 employees. The company plans to offer 40 million shares at $19 to $21 each to raise $800 million. (Note: The company plans to sell 30 million shares and selling shareholders plan to sell 10 million shares in the offering.) The deal is expected to be priced Thursday evening to trade Friday morning on the New York Stock Exchange. The joint-lead managers are: Barclays, Citigroup, Goldman Sachs, Wells Fargo Securities, BMO Capital Markets and RBC Capital Markets The co-managers are: Comerica Securities, SunTrust Robinson Humphrey, Tudor Pickering Holt, Capital One Securities, FBR, Scotiabank-Howard Weil, Johnson Rice and Sterne Agee.

 

If you are ever in a quandary about what to do about an IPO, you can play the percentages. Last week gave you an example. They were: CHC Group Ltd.(HELI) and EP Partners (EPE).

 

CHC Group, a Cayman Islands-based commercial operator of helicopters, priced its IPO of 31 million shares at $10 each to raise $310 million. That was DOWN 38 percent from 29.1 million shares at $16 to $18 each to raise $500 million. The cut didn’t work. CHC Group opened Friday morning, Jan. 17, at $9.30 per share, traded high at $9.87, low at $9.25 and closed its opening day at $9.80, DOWN 2 percent from its initial offering price.

 

EP Partners, a Houston-based independent exploration and production company developing unconventional onshore oil (shale oil) and natural gas properties in the United States, priced its IPO of 35.2 million shares at $20 each to raise $704 million. That was DOWN 29.6 percent from 40 million shares at $23 to $27 each to raise $1 billion. That cut didn’t work, either. EP Partners opened Friday morning at $19.90 per share, traded high at $19.99, low at $18.04 and closed its opening day at $18.08, DOWN 9.6 percent from its initial offering price.

 

Each deal was drastically cut in size. Neither traded above its initial offering price.

 

These reinforced the old adage: “Cut a deal, cancel my order.” If you are looking for a “dead-cat bounce” in cutting an IPO for an opening-day pop, it works about half the time, but not for much. Let’s take a look.

 

From January 2000 through December 2013, 2,243 IPOs were priced, according to the U.S. Securities and Exchange Commission filings. Of that number 747 IPOs were priced BELOW their original filing terms and 1,496 IPOs were priced within and above range. Here are their opening-day scorecards:

 

Priced Below Range (747 IPOs): 381 up, 268 down, 98 unchanged and the median average was up 0.14 percent. (The median average is the mid-point return between the best and the worst.)

 

Priced Within and Above Range (1,496 IPOs): 1,218 up, 205 down, 73 unchanged and the median average was up 14.2 percent.

 

Naturally there are exceptions to the rule. Lately some, but not all, bio-IPOs have been priced well, well below their original filing prices and they got the dead-cat-bounce. Interestingly enough, there is a bio-IPO on next week’s calendar> But more on that later.

 

Stay tuned.