Latest IPO Filing Grades? Incomplete
by Lynn Cowan
Tuesday, November 17, 2009
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In Rush to Market, Companies Leave Many Blanks; No Underwriters or Exchange
A number of companies appear to be in such a hurry to file for IPOs that they have dispensed with the formality of selecting which exchange, or even, in some cases, the names of the underwriters they want on their deals.
Since Oct. 1, seven of the 25 businesses that filed preliminary prospectuses for initial public offerings with the Securities and Exchange Commission have left some combination of these fields blank, according to data from Dealogic.
Though such omissions occasionally occur in U.S. filings, it is unusual to see so many doing so at once. Of particular note are three companies that didn't choose an exchange or any underwriters in their first SEC filings: Graham Packaging Co., Team Health Holdings LLC, and Freedom Group Inc. (Team Health, which initially filed in early October, named its bankers this month in a subsequent filing).
Team Health and Graham are controlled by Blackstone Group LP, while Freedom is backed by Cerberus Capital Management, two private-equity shops that are veterans at completing IPOs. Both Blackstone and Cerberus declined to comment about the filings.
The recent spate of incomplete filings follows a period of higher stock-market volatility and uneven pricing and performance from IPOs compared with earlier in the year, when fewer deals were done but those that did priced well. Analysts say recent pricing and performance have suffered not only because the broader markets have been more volatile, but also because a wider variety of companies are accessing the IPO market, compared with the limited flow of low-risk deals earlier in the year.
The uptick in hasty filings is likely caused by companies wanting to make sure they hit the market in the early part of 2010, says Josef Schuster, founder of IPOX Schuster LLC, a Chicago financial-services firm specializing in IPO products.
It usually takes at least three months from an initial filing until a deal is priced, so it isn't as if any of the companies filing now can accurately predict what the market environment will be in late January, which is probably the earliest they could go public. Bankers have forecast that the first quarter of next year will be busier than now for new stock offerings if the broader markets are stable.
"They are likely rushing because they want to get their deals done while there is this great window of opportunity," Mr. Schuster says.
There could be other factors at work as well: There is plenty of competition among stock exchanges and investment banks to land the few IPOs that have been filing in recent months, and it can be advantageous for pre-IPO companies to stretch out the decision-making process, says Richard D. Truesdell Jr., an attorney who heads the global capital markets group at the law firm of Davis Polk.
That is particularly true in the case of underwriters, who not only want to be named on the deal but who also want to be anointed lead manager, which results in a bigger share of fees and bragging rights. Few know this better than private-equity firms such as Blackstone and Cerberus, who have been through the IPO process scores of times in recent years.
They might be taking their time "to maintain the leverage they have of not designating who is on the cover until they have what they want," Mr. Truesdell says.
