The week was highlighted, if you will, by an industrial sector trying to emerge from the back alleys of lower Manhattan. It flopped on Wall Street.
It was the communications services sector (SIC 4899) (satellite-related companies) and three companies made their debuts. One exploded on take-off and another came up a cropper, but the third did surprisingly well. They were: ORBCOMM, Globalstar and RRSat Global Communications Networks.
ORBCOMM (Nasdaq: ORBC) priced 9.2 million shares at $11 each, below its filing range of $12 to $14 per share. It started trading on Friday at $11 and tanked. It closed at $7.75, DOWN 29.6 percent from its initial offering price.
That was the worst opening-day performance by an IPO in over five years. You have to flip back to April 25, 2002, to find a greater freefall. It was:
DOV Pharmaceutical (Pink Sheets: DOVP.PK), a Somerset, New Jersey-based pharmaceutical company, priced 5 million shares at $13 each and closed its opening day at $8.70, DOWN 33.1 percent from its initial offering price.
The stock is floundering now at around 35 cents per share on the pink sheets.
Satellites in Orbit
Globalstar (Nasdaq: GSAT) priced 7.5 million shares last week at $17 each, above its filing of 6.5 million shares. It opened at $17.01 on Thursday, sold as low as $16.88 and closed at $17.52. On Friday, Globalstar closed at $16.50, DOWN 2.94 percent from its initial offering price.
Increasing the deal by a million shares and then seeing it struggle in the aftermarket raises an eyebrow. Could the underwriters be telling us the aftermarket orders were scraped off the table and added to the offering?
RRSat Global Communications Network (Nasdaq: RRST) priced 3.8 million shares at $12.50 each, on the upper end of its $11- to $13-a-share filing range. It closed on Wednesday at $15.03. On Friday, at $14.02, UP 12.2 percent from its initial offering price.
The company’s business model is content management and distribution services to the television and radio industry.
The tape told us that worked.
Now back to the satellite-related sector.
There have been two IPOs from this sector to go public over the past few years, according to available records. They were New Skies Satellite Holdings Ltd., on September 5, 2005, and PanAmSat, on March 17, 2005. Neither was a barnburner.
New Skies Satellite priced 11.9 million shares at $16.50 each and closed its opening day at $16.40, DOWN 3.53 percent from its initial offering price.
PanAmSat priced 50 million shares at $18 each and closed its opening day at $17.35, DOWN 3.61 percent from its initial offering price.
Both were acquired. Their shares are no longer traded.
If you think last week’s action may have finished investors’ interest in satellite IPOs, think again. There is one more in registration.
Telesat Holdings, a Canadian satellite service provider and wholly owned subsidiary of BCE, Inc. (NYSE: BCE), plans to raise $400 million through the sale of “Class B” Non-Voting shares. BCE will own all the voting “Class A” shares.
Here’s what the prospectus has to say:
- “We intend to use the net proceeds of this offering, as well as a portion of the proceeds of certain debt financings, to make a distribution to our parent company, BCE.” That’s nice.
- “On a pro forma basis, after giving effect to the Recapitalization, as of September 30, 2006, we would have had $1,111.3 million of indebtedness.” That’s nice.
- “Investing in our Class B non-voting shares involves substantial risk.” That’s nice.
Wheels and Oil
But not to worry about last week’s overall IPO traffic, it could very well be the pause that refreshes. Consider the following:
— This week’s IPO calendar lists 12 deals looking to raise $1.37 billion. A few are on somebody’s “most wanted” list. (Please see the calendar on the home page.)
— For the week beginning Nov. 13, the IPO calendar lists eight deals looking to raise $3 billion. The brand-name IPOs are: Hertz Global Holdings (NYSE: HTZ proposed), KBR (NYSE: KBR proposed), the Halliburton spin-off, and NYMEX (NYSE: NMX proposed).
When you include the four IPOs priced since November 1 and about 22 on the forward new-issues calendar, November 2006 is on track to generate 26 deals raising $5.4 billion.
That exceeds the IPO market’s volume a year ago. November 2005 generated 20 deals that raised $3.47 billion.