The 25 day quiet period on underwriter research related to Antero Resources' (NYSE:AR) October 9 IPO will come to an end on Sunday, November 3, indicating a likelihood of at least a rise in the price of AR shares in the days leading up to and following 11/3/13 as underwriters release positive research reports.
The potent list of underwriters, including Barclays, Citi, J.P. Morgan, Credit Suisse, Jefferies & Co., Wells Fargo Securities, Morgan Stanley, TD Securities, Tudor, Pickering, Holt & Co, Baird, BMO Capital Markets, Capital One Securities, Raymond James, Scotiabank/Howard Weil, Credit Agricole CIB, KeyBanc Capital Markets, Mitsubishi UFJ securities, BB&T Capital Markets, and Comerica Securities, will most likely release positive reports in an effort to take further advantage of Antero's extremely successful market debut.
The IPO beat the expected price range of $38.00-42.00 with a pricing of $44.00 per share, and its value has only increased since; the stock closed at $56.30 on October 25, a shade below its peak price at $57.00 on October 28.
Both our research work and recent academic studies have provided empirical evidence of a correlation between the number and visibility of underwriters and a rising stock price at the expiration of the quiet period.
Needless to say, Antero's IPO featured an unusually heavy-hitting list of underwriters, so the effect may be magnified, although the booming stock scarcely needs the assistance of positive research reports.
The price increase typically emerges a few days in advance of the end of the quiet period; as investors realize that the underwriters will issue detailed positive research reports, since there would be little purpose in negative reports on a recently underwritten firm where investment bankers have been paid a big fee. Aggressive investors typically begin to buy before the reports have actually been published.
Antero Resources' hot start on the market doesn't look like a fluke; the firm is profitable and looks to be ahead of much of the competition in the shale game. Some of its competitors include Plains All (NYSE:PAA), Southcross (NYSE:SXE), MarkWest Utica EMG (NYSE:MWE) and Crosstex Energy (XTEX).
The firm is grounded in significant natural gas reserves, meaning that it is less subject to the variations of oil prices than some similar firms (though it does maintain some interest in oil). The firm's decision to spend the bulk of the money raised in the IPO to pay down debt is encouraging for those seeking a stable investment.
Antero Resources Corporation is a Denver, Colorado-based natural gas and oil firm with operations in the Appalachian Basin in Pennsylvania, Ohio and West Virginia. The firm has large holdings in a pair of premier American shale plays: some 329,000 net acres of the Marcellus Shale along with some 102,000 net acres of the Utica Shale. Approximately 170,000 net acres of the firm's leasehold in the Marcellus Shale are additionally prospective for the Upper Devonian Shale. Antero has been quick to take advantage of novel hydraulic fracturing and completion techniques, and has over 450 horizontal wells in the Woodford, Barnett, Utica and Marcellus Shales.
Paul Rady has served Antero and its predecessor company as CEO and Chairman since 2002, and previously served as President, CEO and Chairman of Pennaco Energy. He is also the former CEO of Barrett Resources.
Disclosure: I am long AR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.