Buyer's IPO Market: 5 Companies Go Public After Cutting Deal Size

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 |  Includes: GNRC, GRM, PDM, QNST, TRNO
by: Renaissance Capital IPO Research

Of the five public offerings that were successfully launched last week, all priced below the midpoints of their respective ranges. Additionally, two companies slated to begin trading, Chinese solar company JinkoSolar Holding (NYSE:JKS) and workers' compensation insurer Patriot Risk Management (PMG), both postponed their IPOs. While valuation decreases and postponed offerings were trends in late 2009, the year-to-date volatility in the overall markets has further affected IPO activity, forcing underwriters to either shelve deals or accommodate prospective buyers by offering generous price reductions.

The week's strongest performer was Piedmont Office Realty Trust (NYSE:PDM), a REIT that owns 73 office buildings in major US cities, which raised $174 million on Tuesday by offering 12 million shares at $14.50, below the range of $16-$18. The company had originally planned to offer 18 million shares. Despite the reduction in deal size, Piedmont's stock rose 8% in its debut and an additional 3% in aftermarket trading, helped by a strong balance sheet and an IPO price that offered a discount to book value.

Newly formed REIT Terreno Realty (NYSE:TRNO), which targets industrial real estate in six coastal U.S. markets, fared less well after raising $175 million on the same day. The company had delayed its offering after cutting the deal size by 33% in late January and ended up raising 42% fewer proceeds than the originally proposed $300 million. Terreno's shares tumbled almost 7% in its debut and have rebounded only slightly since.

Graham Packaging (NYSE:GRM), a leading supplier of plastic containers for food and beverage and other consumer products, began trading on Thursday and raised $167 million by offering 16.7 million shares at $10, the low end of its downwardly revised range of $10-$11. The Blackstone-owned company had originally filed to sell 23.3 million shares including 6.7 million from insiders at a price range of $14-$16 before lowering the price range and dropping the insider selling component. Graham's stock is up 5% from its listing price and was the only one of Thursday's new issues to post a first-day gain.

Graham was followed by another private equity-backed company: Generac Holdings (NYSE:GNRC), a manufacturer of standby generators backed by CCMP Capital Advisors. The Waukesha, WI-based company raised a lower-than-expected $244 million by offering 18.75 million shares at $13 apiece after originally planning to sell 20.3 million shares at a price range of $15-$17. Generac's stock fell 1% in its debut but made a moderate recovery and is now up 3% from its IPO price.

Lastly, QuinStreet (NASDAQ:QNST), a leading provider of online lead generation services to the education and financial services sectors, raised a lower-than-expected $150 million by selling 10 million shares at $15, 17% below its original range of $17-$19. Despite generating buzz as the largest internet new media IPO in four years and Frank Quattrone's return to the IPO space, the Foster City, CA-based company saw its stock remain flat in its debut and fall more than 3% in aftermarket trading.

Though issuance volume and performance was an improvement in comparison with the previous week, which saw only one out of four scheduled IPOs price, the cuts in deal size and offering prices demonstrate that companies still face a tough IPO market. Buyers appear to have the power to push IPO valuations down, which in some cases has led to positive early trading but in others has led to financial sponsors pulling deals. The trend seems to be a global one, with large anticipated LSE deals Travelport (TVP.LN) and New Look (NWL.LN) recently announcing news of their postponements.