The IPO Buzz: Back To Work

This week’s calendar is expected to print over $1 billion worth of IPOs. There are only three deals on the launching pad, but the buzz around Wall Street is all are inplay. That being said, let’s get to them.

They are in the order of size:

  • MGM Growth Properties LLC (MGP – proposed) plans to price 50 million shares at $18 to $21 each to raise $975 million.
  • American Renal Associates Holdings (ARA – proposed) plans to price 7.5 million shares at $20 to $23 each to raise $161.3 million.
  • SecureWorks (SCWX – proposed) plans to price 9 million shares of Class A common stock at $15.50 to $17.50 each to raise $148.53 million.

Roll the Dice

MGM Growth Properties LLC is a Las Vegas-based real estate investment trust (REIT) newly formed to acquire, own and lease entertainment and leisure resorts, including casino gaming, hotel, convention, dining, retail and entertainment properties. Upon completion of the offering, MGM Growth will acquire from MGM Resorts International nine premier destination resorts in Las Vegas and elsewhere across the U.S. and one dining and entertainment complex expected to open in April 2016. The properties include The Park in Las Vegas, Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor and Excalibur. These properties are reported to have about 24,466 hotel rooms, 2.5 million convention square footage, over 100 retail outlets, over 200 food and beverage outlets and 20 entertainment venues.

The buzz: People are reportedly looking at MGM Growth more as a spinoff from MGM Resorts and a player in the gambling industry rather than as a REIT. The gambling sector, as measured by the Dow Jones U.S. Gaming Index (DJUSCA), has been strong. It closed Friday, April 15, 2016, at 649.01, UP 38.1 percent from 470.23 on Feb. 9, 2016, its recent closing low. Historically speaking, REITs do not produce opening-day moonshots. They usually trade around their initial offering prices. The betting around town is to expect more from the MGM Growth IPO. Note: As a REIT, the company is planning to make quarterly cash distributions of 35.75 cents per share, or $1.43, to yield 6.98 percent annually at the mid-point of its price range.

MGM Growth Properties is expected to be priced Tuesday, April 19, 2016, to trade Wednesday, April 20, 2016.

American Renal Associates Holdings is a Beverly, Massachusetts-based health-care provider that owns and operates kidney dialysis facilities. The company partners with about 350 local nephrologists to develop, own and operate dialysis clinics. The company gives physicians clinical autonomy and operational support, along with hiring and retaining staff and providing practice-management services.

The buzz: This deal could be what the doctor ordered. It has all the magic words to attract investors. American Renal believes it is the largest dialysis provider in the U.S. It has growing revenues and is profitable. For the year ended Dec. 31, 2015, American Renal reported net operating revenues of $653 million, UP from $560.7 million a year ago, and net income of $18.8 million, UP from $16.6 million a year ago.

American Renal Associates is expected to be priced Wednesday, April 20, 2016, to trade Thursday, April 21, 2016.

SecureWorks is an Atlanta-based global provider of intelligence-driven information security solutions focused on protecting clients from cyberattacks. The company’s solutions enable organizations to fortify their cyber defenses to prevent security breaches, detect malicious activity in real time, prioritize and respond rapidly to security breaches and predict emerging threats. As of January 29, 2016, SecureWorks served over 4,200 clients across 59 countries.

The buzz: (1) SecureWorks competes in one of today’s hot industrial sectors – the cybersecurity – and reportedly has drawn investors’ interest. The company has growing revenues. For the year ended Jan. 29, 2016, SecureWorks reported net revenues of $339.5 million UP from $262.1 million a year ago. However the company is losing money. For the year ended Jan. 29, 2016, it reported a net loss of $72.4 million, UP from a net loss of $38.5 million a year ago and reported an accumulated deficit of $122.6 million. (2) SecureWorks is a spinoff from Denali Holdings, a wholly owned subsidiary of Dell Inc. After the offering, Denali will own about 70 million shares of Class B common stock representing about 86.1 percent of the total outstanding shares of common stock and about 98.4 percent of the voting power of both classes of common stock.

SecureWorks is expected to be priced Thursday, April 21, 2016, to trade Friday, April 22, 2016.

To summarize this week: The calendar has three deals expecting to raise about $1.3 billion.

Looking into the week of April 25, 2016, the IPO calendar now has one deal expecting to raise about $531 million. But anything can happen on Monday morning, April 18, to effect the coming week.

Stay tuned.

Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinion.