A company planning to go public has to pony up, spending serious cash to pull out of the driveway before it can hit The Street.
Standard Parking’s amended filing for its IPO, scheduled to be priced during the week of May 24, tells the story.
In its filing on Tuesday with the U.S. Securities and Exchange Commission, Standard Parking tallied up its offering expenses – otherwise known as the cost of going public – to the tune of $2,973,369. That’s right, nearly $3 million. Serious money. And it’s cold hard cash coming right out of the company’s pocket – with or without collecting the proceeds of going public. Here were some of the major expense items:
· legal fees and expenses: $1,675,000 (note: This is always the largest expense in any underwriting).
· accountants’ fees and expenses: $550,000 (commonly the second-largest expense).
· printing and engraving expenses: $350,000 (third-largest expense).
· miscellaneous: $250,000 (Don’t you love it?)
These costs will not be part of the underwriting discount. That generally runs about 7 percent of the amount raised. In Wall Street jargon, the underwriting discount is “the spread.”
notLet’s take a look at a couple of recent IPOs: NuVasive and Intersections.
On May 5, NuVasive, a San Diego-based medical device company that develops products for the surgical treatment of spine disorders, filed an amendment with the SEC giving a breakdown of its offering expenses. The total was $1,700,000. On May 15, the company priced its IPO of 6.5 million shares at $11 each. The underwriting discount was 77 cents per share or a total of $5,005,000.
On April 27, Intersections, a Chantilly, Virginia-based provider of identity theft protection and credit management services, filed an amendment with the SEC giving a breakdown of its offering expenses. The total was $1,760,000. On April 30, the company priced its IPO of 6.25 million shares at $17 each. The underwriting discount was $1.19 per share or a total of $7,437,500.
As these numbers show, it costs a company millions to start down the road to going public – even if it doesn’t make it to market with an IPO.
The conclusion: IPO filings are serious business. They most emphatically do not indicate a company is merely dipping “a toe in the pond” to see if the water is warm enough to take the plunge into the market.
Eight is enough
Speaking of taking the plunge: This is a busy week for investment bankers. With the Memorial Day holiday just around the corner on Monday, the new-issues calendar is being force-fed. At press time, bankers were looking to price eight deals. The week’s headliner is the blockbuster IPO for insurance company Genworth Financial.
Genworth FinancialGenworth Financial plans to price its IPO of 145 million shares at $21 to $23 each to raise $3.19 billion. That would make it the tenth-largest U.S. IPO ever, according to available records. The largest U.S. IPO was in March 2000, when AT&T Wireless priced its IPO of 360 million shares at $29.50 each to raise $10.62 billion.
AT&TMorgan Stanley and Goldman Sachs are the co-lead managers for the Genworth offering, with a slew of others in on the game. Acting as senior co-managers are Banc of America Securities, Citigroup, Credit Suisse First Boston, Deutsche Bank Securities, Lehman Brothers, Merrill Lynch, JP Morgan, and UBS Investment Bank. Acting as junior co-managers: Blaylock & Partners, Cochran, Caronia & Co., Dowling & Partners, Edward D. Jones, Fox-Pitt, Kenton, KeyBanc Capital Markets, Legg Mason Wood Walker, Raymond James, Stephens, and The Williams Capital Group.
and , Securities, , JP Morgan, and Wood Walker, Raymond James, Stephens, and The Williams Capital Group.
Richmond, Virginia-based Genworth Financial offers life insurance and other insurance to protect lifestyle, retirement income, investments, and mortgages. Genworth has more than 15 million customers in the U.S. and 20 other countries.
For the year ending December 31, 2003, Genworth reported total revenues of $11.67 billion and net income of $969 million.
For the year ending December 31, 2002, Genworth reported total revenues of $11.2 billion and net income of $1.4 billion.
Genworth, with 5,640 employees, was formed recently. Before the offering, Genworth will acquire substantially all of the assets and assume certain liabilities of GE Financial Assurance Holdings, an indirect subsidiary of General Electric (Yes, that’s the same blue-chip GE whose most memorable advertising slogan still is: “GE, we bring good things to life”).
General ElectricBankers plan to price the Genworth deal Monday evening, May 24, to trade the following day.
52-week percentage changes
Dow Jones Insurance, Full-Line Index: up 25.3 percent
Nasdaq Composite Index: up 27.3 percent
The buzz
All the proceeds of nearly $3.2 billion from the sale of the stock will go to GE Financial Assurance Holdings. Genworth Financial will not receive a penny from the offering.
The deal is huge. Since 2001, 11 American-based companies have gone public offering an IPO in excess of $1 billion. The average opening-day gain was up 6.83 percent. Should the Genworth IPO score an opening-day gain of 6.8 percent, it would be up about $1.50 from an offering price of $22 per share, the mid-point of its $21- to $23-per-share filing range.
As one of Wall Street’s syndicate people said, “Don’t expect this deal to be a runaway freight train in the aftermarket.”
Plenty of parking
This brings us back to the Standard Parking IPO.
Standard Parking plans to price its IPO of 4.1 million shares at $14 to $16 each to raise $61.5 million.
The Chicago-based company operates about 1,900 parking facilities in more than 275 cities in the U.S. and in Canada.
For the year ending December 31, 2003, Standard Parking reported total revenues of $545.5 million and a net loss of $3.8 million.
For the year ending December 31, 2002, Standard Parking reported total revenues of $561.8 million and a net loss of $35.5 million.
As of March 31, the company had an accumulated deficit of $185.4 million.
Standard Parking, with 11,680 employees, has been in business for about 75 years.
Bankers plan to price the deal Tuesday evening, May 25, to trade the following day.
52-week percentage changes
Dow Jones Consumer, Cyclical Index: off 0.4 percent
Nasdaq Composite Index: up 27.3 percent
The buzz
There isn’t a lot on this one. In sum: It’s a well-established company with a history of losses.
The rest of the list
Acadia Pharmaceuticals is a San Diego-based biopharmaceutical company focusing on the discovery of small-molecule drugs to treat central nervous system disorders. Acadia plans to price its IPO of 5 million shares at $12 to $14 each to raise $65 million on Tuesday evening, May 25, to trade the following day. The co-lead managers are Banc of America and Piper Jaffray.
Alnylam Pharmaceuticals is a Cambridge, Massachusetts-based biopharmaceutical company seeking to develop novel therapeutics based on a recently discovered biological pathway known as RNA interference. The company plans to price its IPO of 5 million shares at $10 to $12 each to raise $55 million on Wednesday evening, May 26, to trade the following day. The lead manager is Banc of America.
Critical Therapeutics is another biopharmaceutical located in Cambridge. Itdevelops products to regulate the inflammatory response associated with asthma and other chronic diseases. Critical plans to price its IPO of 6 million shares at $11 to $13 each to raise $72 million during the week of May 24. The lead manager is SG Cowen.
Inhibitex is an Alpharetta, Georgia-based biopharmaceutical engaged in the discovery of antibody-based products to prevent and treat bacterial and fungal infections in the hospital setting. Inhibitex plans to price its IPO of 5.9 million shares at $10 to $12 each to raise $64.9 million on Wednesday evening, May 26, to trade the following day. The co-lead managers are Thomas Weisel Partners and Lazard.
52-week percentage changes
Dow Jones Pharmaceuticals Index: up 4.1 percent
Nasdaq Composite Index: up 27.3 percent
Angio Dynamics is a Queensbury, New York-based provider of medical devices used in minimally invasive, image-guided procedures to treat peripheral vascular disease. Angio Dynamics plans to price its IPO of 1.95 million shares at $12 to $14 each to raise $25.4 million on Wednesday evening, May 26, to trade the following day. The lead manager is RBC Capital Markets.
52-week percentage change
Dow Jones Advanced Medical Supplies Index: up 27.1 percent
Nasdaq Composite Index: up 27.3 percent
Republic Airways Holdings is an Indianapolis-based holding company that operates Chautauqua Airlines and Republic Airlines, offering about 517 flights daily to 64 cities in 27 states, Canada, and the Bahamas. The company plans to price its IPO of 5 million shares at $14 to $16 each to raise $75 million on Tuesday, May 25, to trade the following day. Merrill Lynch and Raymond James & Associates are the co-lead managers.
52-week percentage changes
Dow Jones Airlines Index: down 0.1 percent
Nasdaq Composite Index: up 27.3 percent
The pick of the week
Nobody.
For the week that starts on Monday, May 24, the IPO calendar lists eight deals expected to raise about $3.6 billion. The most high-profile name on that list is Genworth Financial. So far, Genworth has not attracted the kind of buzz to rank it as a “pick of the week.”
The following week kicks off with the observance on Monday, May 31, of the Memorial Day holiday. Not much is expected to pop out of the IPO pipeline during that holiday-shortened week.
But the new-issues calendar for June is starting to take shape. Last year’s IPO scorecard showed three IPOs were priced in June 2003. Those deals raised $1.5 billion. At press time, this June looked to be much more than that.
What’s the message? With any luck, the IPO market will be bustling over the month, and investment bankers won’t have much time for a vacation.