Friday, September 21, 2012
Profits in IPO Market
The fate of initial public offerings this week provides insight into investor sentiment. On September 20, 2012, Smith Electric Vehicles withdrew its common stock offering, citing poor valuation that was not in the best interests of shareholders. The company had filing an S1 document with the SEC in November 2011, to raise as much as $125.0 million, but later reduced the offering to $92.1 million. Smith Electric Vehicles produces all-electric commercial vehicles used for mass transit, deliveries and warehouse work. While Smith has a number of high profile customers such as FedEx, Staples and CocaCola, apparently investors were less than excited about the company’s reported loss of $52.5 million on $50.0 million in total sales in 2011. Management indicated they intend to approach the private equity market, where they expect to get more respect.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.
Another alternative energy company, Pacific Ethanol (PEIX: Nasdaq) decided to forge ahead in its follow-on offering of 27.5 million units composed of one share of common stock and one warrant. PEIX had closed at $0.54 per share on the day prior to the pricing. Pacific Ethanol’s management team had no hesitation in accepting a price of $0.40 per unit. On the first day of trading following the pricing, PEIX closed lower by $0.16 at $0.38 per share.
There were five other deals scheduled this week, four in the financial services or real estate segments and one in oil and gas. Susser Petroleum (SUSP: Nasdaq) sold 9.5 million shares at $20.50 per share and was holding its own near $23.00 per share in the early hours on the last trading day. The two banks who staged initial offerings both closed were able to raised $342 million between them. Capital Bank Financial (CBF: NYSE) closed flat with the IPO price and National Bank Holding (NBHC: Nasdaq) managed to squeeze out a two bit gain. Likewise the single real estate related deal, Spirit Realty (SRC: NYSE), was flat with the IPO price of $15 per share.
The only real success in the public capital markets this week was the real estate listing company, Trulia,Inc. (TRLA: Nasdaq). Trulia spiked 40% above its $17.00 IPO price set on Thursday, providing investors with a thrill reminiscent of better days in years past.
The Federal Reserve’s decision to undertake additional quantitative easing appears to have created a favorable sentiment for financial services and real estate related companies. While I would like to see a better reception for energy alternatives in the capital markets, it is at least promising to see successful deal such as that of Trulia. After the Facebook debacle, investors needed to see the capital market can yield profits on an IPO.