The IPO Buzz: IPO Party of Five

The 2010 new-issues season opens with five deals set to be priced Thursday evening and all expected to trade Friday morning. The input from investment professionals is that this week’s menu is not all that exciting.

 

Here’s what Friday has to offer. The calendar is a mixed bag with a retread, two Chinese deals, a REIT and a toilet tissue manufacturer. The leading name among the deals is the retread. It’s been on the IPO calendar before.

 

Symetra Financial (NYSE: SYA proposed), a Bellevue, Washington-based life insurance company, is making its second attempt to go public.

 

On June 29, 2007, Symetra filed for an IPO to raise $750 million. Worth noting: All the stock was to be offered by insiders, including such shareholders as Berkshire Hathaway (NYSE: BKR.A), White Mountains Insurance Group (NYSE: WTM), and Franklin Mutual Advisers. Not surprising, none of the proceeds from the offering were going to the company.

 

Of course the first thing that went through everybody’s mind was: “Why should I buy when Warren Buffet is selling?”

 

On Nov. 5, 2007, the pricing terms were announced with the company planning to offer 39.5 million shares at $18 to $20 each to raise $750.5 million. The deal quickly jumped onto the IPO calendar to be priced the following week, Nov. 12. By week’s end, Nov. 16, 14 IPOs had made their debuts. Symetra was not one of them. The deal had been postponed.

 

Almost a year later, on Oct. 10, 2008, the Symetra Financial offering was withdrawn.

Fast forward to fall 2009.

 

On Oct. 5, 2009, Symetra filed once more to go public. This time the company was looking to raise $575 million, down from the previous filing of $750 million. And fewer insiders were looking to sell their stock.

 

Now flip the calendar to Jan. 5, 2010, when Symetra’s proposed offering terms were announced. The filing showed 27 million shares would be offered at $12 to $14 each to raise $351 million. The company planned to offer about 17.3 million shares and insiders expected to offer about 9.7 million shares.

 

The names of Berkshire Hathaway, White Mountains Insurance Group and Franklin Mutual Advisers were not among those selling shareholders.

 

To calm some concerns, all the insiders entered into the standard lock-up agreement to not sell any of their stock for 180 days after the offering. Here’s what the prospectus had to say:

 

“In connection with this offering, each of our executive officers, directors and stockholders have agreed to enter into lock-up agreements described under “Underwriting” that restrict the sale of shares of our common stock and securities convertible into or exchangeable or exercisable for common stock for up to 180 days after the date of this prospectus, subject to an extension in certain circumstances.”

 

As in any such agreement, should the IPO surge before the expiration of its 180-day lock-up period, you can expect to see “certain circumstances” spark a follow-on offering.

 

Hey, what’d you expect? This is Wall Street.

 

Now let’s look at the Chinese IPOs on this week’s calendar.

The two deals are Andatee ChMarine Fuel Services (NASDAQ: AMCF – proposed) looking to raise $17.5 million, and China Hydroelectric (NYSE: CHC – proposed), expecting to raise $50 million.

 

U.S.-offered Chinese IPOs have caught the eye of the financial press. That was the place to have been last year.

 

Consider this: A total of 13 Chinese IPOs were priced in 2009. By the close of trading on December 31, the year’s three biggest IPO winners were out of China:

On the other hand, Chinese IPOs were not the place to have been last year. The group was far from a slam dunk.

 

Eight of the 13 Chinese IPOs closed last year BELOW their initial offering prices. Overall only 38.5 percent of the U.S.-offered Chinese IPOs finished the year as winners.

 

In contrast, 62 IPOs were priced in the U.S. capital markets during 2009. Excluding the 13 Chinese deals, the scorecard for the other 49 made for much better reading.

 

Thirty-three IPOs closed the year above their initial offering prices, with 16 below their IPO prices. As a group, 67.3 percent were winners.

 

If all five of this week’s deals get out the door for Friday’s trading, it will be the busiest IPO opening day in over a decade, according to U.S. Securities and Exchange Commission filings.

 

And who knows? There could be some lightning from this week’s calendar. The investment professionals didn’t think so at press time, but we’ll find out soon enough.