The IPO Buzz: Cashing In On Chaos

Fluidigm was the only deal on the new-issues calendar. It was scheduled to be priced Monday evening. It didn’t get done. Instead, the deal was made “day to day” before being withdrawn.
There was virtually nothing on the secondary calendar on Monday morning. By Friday afternoon, bankers had taken advantage of the stock market’s wild swings and priced 16 deals. In the process, they raised almost $17 billion.
Among the notable names were JPMorgan Chase (NYSE: JPM) (Quote, news and chart) and Goldman Sachs Group (NYSE: GS) (Quote, news and chart).
Some Serious Money
JPMorgan was the largest and best aftermarket performer of last week’s 16 secondary offerings. On Friday morning, JPMorgan priced 246.9 million shares at $40.50 each to raise $10 billion. The deal was priced in the hole, well below its previous close of $43.46. The stock traded the same day — opening at $40.50 and closed at $48.24, UP 19.1 percent from its offering price.
Goldman Sachs was the week’s second-largest secondary offering of the week. On Tuesday night, Goldman Sachs priced 40.7 billion shares at $123 each to raise $5 billion. That too was below its previous close of $125.05. The stock opened on Wednesday at $128.44 and closed at $133, UP 8.1 percent from its offering price. It closed Friday at $137.99, UP 12.1 percent from its offering price.
Pricing deals below their previous close became the norm in last week’s chaotic stock market. Underwriters priced 13 of the 16 secondary offerings below their previous closes. And it worked — 10 of the 13 closed their initial trading days above their offering prices.
This brings us to this week.
Bankers have one IPO and one secondary offering on the equities calendar for this week. In each case, the deals have no expected pricing dates other than “the week of.”
The IPO Calendar
The IPO is Safety-Kleen. Here’s the story.
The company emerged from bankruptcy in 2003, according to its prospectus, has accumulated deficits of $275 million and its insiders, venture capitalists, plan to sell about 17.2 million shares — about 78.5 percent of the 21.9 million shares being offered.
Nevertheless, there’s a plus. The proceeds from the company’s sales are to be used for general corporate purposes, such as working capital. There is no big dividend payoff earmarked for the VCs.
Safety-Kleen (NYSE: SK proposed) (Quote, news and chart) is a Plano, Texas-based provider of used oil re-refining and recycling and parts cleaning services. It also is a provider of other environmental solutions, such as used oil collection, containerized waste services, vacuum services and total project management services. The company operates over 200 facilities in the United States, Canada and Mexico.
In June 2000, the predecessor company filed for Chapter 11 bankruptcy protection and Safety-Kleen emerged from bankruptcy in December 2003 with Safety-Kleen HoldCo.
Safety-Kleen plans to price 21.9 million shares at $15 to $17 each to raise $350 million. The company expects to offer 4.7 million shares and selling shareholders expect to offer 17.2 million shares.
The Safety-Kleen IPO is to start trading during the week of Sept. 29, 2008.
For the year ending December 29, 2007, Safety-Kleen reported net income of $4.5 million on revenues of $1.07 billion, compared with a net loss of $73.4 million on revenues of $1 billion for the same period a year ago.
For the 28 weeks ending July 12, 2008, Safety-Kleen reported net income of $19.9 million on revenues of $640.6 million, compared with a net loss of $1.9 million on revenues of $559.6 million for the same period a year ago.
As of July 12, 2008, Safety-Kleen reported an accumulated deficit of $275 million.
Formed in 1963, Safety-Kleen has about 4,300 employees.
Underwriters: Merrill Lynch and JPMorgan are the joint-lead managers. Acting as co-managers are Citi, Credit Suisse and Lehman Brothers (according to the most recent prospectus).
Selected Principal Shareholders: Highland Capital Management, Contrarian Capital Management, JPMorgan Chase and GSC Group.
The Secondary Calendar
Osmetech plc (GMS: OSMH proposed) is a Pasadena, California-based manufacturer of an advanced molecular diagnostic platform, the eSensor platform, that lets hospitals and reference laboratories perform simple, rapid and cost-effective DNA, RNA and protein testing.
The company’s shares are traded on the AIM Market of the London Stock Exchange plc, or AIM, under the ticker symbol “OMH” (Quote, news and chart).
Osmetech plans to price 5.5 million American Depositary Shares (ADS) at $7 to $9 each to raise $44 million. Each ADS represents 35 ordinary shares. The prospectus stated: “On September 25, 2008, the last reported price on AIM was £0.0963 per ordinary share equivalent to $6.20 per ADS.”
Some call this deal an “IPO,” but as you can see its underlying shares currently are traded. This makes the deal a secondary or follow-on offering. Investors can buy all the stock they wish on the AIM ahead of the ADS offering expected this week in the United States.
Underwriters had no expected pricing date for the Osmetech deal other than for “the week of Sept. 29.”