Busy week on tap for IPOs, but are prices right?
Next week is shaping up to be a busy one for market debuts with four companies planning IPOs — a sign that the battered sector is again picking up steam. Still, the deals are generating little buzz and the companies may have to cut the amounts they hope to raise.
The more than $600 million that Texas Instruments Inc. spin-off Sensata Technologies Holding BV is looking to raise would make it the largest initial public offering so far this year. But analysts who follow the IPO market say that its heavy debt load of more than $2 billion and erratic sales may lead the maker of sensors for everything from automobiles and airplanes to refrigerators, to slash its price dramatically.
The company, based in the Netherlands, plans to sell 31.6 million shares between $18 and $20 apiece and trade under the symbol "ST."
"Sensata's sales are down, their debt is absolutely enormous and a private equity company is backing the deal," said Scott Sweet, who analyzes IPOs for IPOBoutique.com. "That has proven not to be a winning combination right now."
Investors have become weary of companies with weak balance sheets, private equity firms looking to cash in and deals designed to pay down debt.
While the upcoming market debuts haven't received high ratings from analysts, four deals in one week is still impressive, said John Fitzgibbon of IPOScoop.com. Comparatively, there were seven companies that made it to the market in January, and eight in February.
"There's been a huge hiatus and traffic has been light, but we're on the down swing of a cycle that's going to come up with stability in the market," Fitzgibbon said. "These bankers are updating their numbers and starting to put things on the calendar, and if they have to mark it down to get it out the door, they will."
So far this year, companies that have made it to market have largely had to accept lower prices for their shares due to a volatile stock market and concerns about the economic recovery. Others have postponed or canceled their IPOs altogether.
Next week may be no exception.
Biotechnology company Aveo Pharmaceuticals Inc. plans to raise $98 million, selling 7 million shares at $13 to $15 each. But Sweet says the Cambridge, Mass. company, which is focused on developing cancer therapies, will likely meet the same fate as Anthera Pharmaceuticals Inc. It had to slash its price when it went public last week and raised less than 60 percent of what it had hoped.
Investors are jittery about approvals from the Food and Drug Administration, and that Aveo's lead product candidate, Tivozanib, may not be ready until 2013, Sweet said. The company's stock is expected to trade under the symbol "AVEO."
Meanwhile, two bulk shippers incorporated in the Marshall Islands — Baltic Trading Ltd. and Crude Carriers Corp. — are competing against one another for investor interest.
"I question the wisdom in planning to have these two deals in the same week," Sweet said. "You don't see that in the best of times, and right now the entire bulk shipping sector has been hammered and is already on sale at bargain basement prices."
Neither company currently has ships; both plan to use the proceeds to purchase vessels. Baltic Trading, based in New York, plans to sell 16.3 million shares at $14 to $16 to raise $244.5 million and is a spin-off of Genco Shipping & Trading Ltd.
Crude Carriers, based in Greece, hopes to raise $270 million by selling 13.5 million shares for $19 to $21. Baltic trading is expected to trade under the symbol "BALT," while Crude Carriers is set to trade under "CRU."