Digicel IPO Will Wait for Calmer Markets, CEO O'Brien Saysby
Caribbean mobile phone operator to reconsider in 12-18 months
Public markets showing signs of life after rocky start to 2016
After canceling Digicel Group Ltd.’s initial public offering last year, billionaire chairman Denis O’Brien said he’ll revisit plans to go public in a year to 18 months.
O’Brien blamed the holdup on the volatile market conditions that have plagued stocks since before the offering was postponed on Oct. 6, all but shutting down the market for U.S.-listed IPOs for nearly half a year. Digicel will reconsider selling shares publicly “when things improve in the equity markets,” O’Brien said in an interview Tuesday with Bloomberg Television.
The co-founder of the Caribbean’s largest mobile phone operator isn’t alone in calling a time-out on going public -- many executives considering public listings have chosen to wait out market turbulence. Spanish-language television network Univision Holdings Inc. and textbook publisher McGraw-Hill Education Inc. have pushed back offering plans until at least the second half of the year, according to people familiar with the deals.
Since a market-wide rout in August, sustained market volatility has made it difficult to price offerings. Meanwhile, publicly traded competitors have sold off, driving down valuations, while risk-averse investors have demanded deeper discounts to be willing to take a chance on a new stock offering.
It “was just a shocking time,” O’Brien said. The share sale ran “into a lot of headwinds.”
This cocktail of factors led to a number of large deals -- including Kingston, Jamaica-based Digicel -- to be pulled at the end of 2015. With only 17 corporate IPOs listing since January, excluding real estate investment trusts, special-purpose companies and funds, it’s also been the slowest start to a year for the U.S. IPO market since the recession. according to data compiled by Bloomberg.
Last month showed a break in the chill when exchange operator Bats Global Markets Inc. went public, the first non-biotech deal of the year. That offering priced at the high-end of its marketed range after seeing demand from investors for 20 times the number of shares being sold, a person familiar with the matter said at the time.
One successful IPO doesn’t mean the listings window has swung wide open, however.
A week after Bats went public, Dell’s cybersecurity company SecureWorks Corp. priced its offering 15 percent lower than the midpoint of its marketed range and sold fewer shares than expected. Casino operator Red Rock Resorts Inc. priced at the midpoint of its marketed range. Its shares have traded below the $19.50 IPO price since it began trading last week.
Seven more companies are expected to price listings through the end of next week, bringing the year’s count to 24, according to data compiled by Bloomberg. That’s still less than half the 62 companies that went public in the same period last year.