U.S. IPOs Rattled by Volatility May Be Back for Year-Endby
Firms raised $6.1 billion in third quarter, least since 2012
First Data, Pure Storage, Digicel on deck to go public in 4Q
After a modest quarter for U.S. initial public offerings, disrupted by soaring market volatility in August, several companies including First Data Corp. and Pure Storage Inc. are on deck to go public in the next month, signaling that the year may end on a more interesting note.
Companies going public in the U.S. from July through September raised about $6.1 billion, the lowest volume in the third quarter since 2012, according to data compiled by Bloomberg. That volume also reflects more than an 80 percent drop from the year-earlier quarter, primarily because Alibaba Group Holding Ltd. raised a record $25 billion in a U.S. listing last September.
Houlihan Lokey Inc., the boutique advisory firm founded more than 40 years ago, and high-end animal-food retailer Blue Buffalo Pet Products Inc. both tapped public markets in the 3 months through September. They were among 30-odd companies to go public in the period, the fewest for the third quarter in three years, the data compiled by Bloomberg show.
The lull may be over. There are 18 IPOs that have priced are or scheduled to price in the 30 days ending Oct. 14, when First Data’s offering is slated. That would make it the busiest month-long period since June, the data show. In what could be the biggest IPO of 2015, payments processor First Data is seeking to raise as much as $3.2 billion, according to a filing Thursday.
Digicel Group Ltd., the mobile-services company based in the Caribbean and owned by Irish billionaire Denis O’Brien, plans to raise as much as $2 billion on Oct. 7, in what could be the second-biggest IPO this year. Pure Storage, the second-biggest seller of all-flash storage systems, is also marketing its initial offering and is scheduled to price its shares on Oct. 6.
Meanwhile, Albertsons, the grocery chain backed by Cerberus Capital Management, plans to raise as much as $1.7 billion, according to a filing Friday. The company is scheduled to price its IPO on Oct. 14.
“As we look forward, there are a handful of headline transactions that will be some important barometers for the market,” said Jeff Bunzel, managing director and head of equity capital markets Americas at Deutsche Bank AG.
How those offerings go, and how the stocks fare when trading begins will be an indication of investor sentiment after a cocktail of events fueled uncertainty and volatility in U.S. equity markets. Those include concerns about the Chinese economy, fueling the Aug. 24 market correction that sent the Standard & Poor’s 500 Index tumbling 3.9 percent for the day. The Federal Reserve also delayed raising interest rates in September, keeping them at levels held since the depths of the financial crisis. The move raised questions about whether higher rates could rattle the markets when they do come.
Since the August rout, the Chicago Board Options Exchange Volatility Index, a gauge of investor nervousness, has held above the disquieting level of 20 for 28 straight days. Even more reason why IPOs from Digicel, Pure Storage and First Data will be closely watched, both by companies considering their own offerings and by their bankers.
Performance Food Group Co., the food distributor majority owned by Blackstone Group LP, raised $275.5 million in an IPO Wednesday, pricing the shares below a marketed range. The stock climbed 1.1 percent in its debut Thursday.
“There is a lot of stuff that we can’t give a lot of hand-on-the-heart conviction to our corporate and financial sponsor clients because August was very disruptive market-wise,” said James Palmer, head of equity capital markets for the Americas at UBS Group AG. "This is a critical testing period. You’re seeing a pretty selective crowd of IPOs coming out.”