The quiet period on the many underwriters research reports on handysize liquefied gas carrier operator Navigator Holdings (NVGS) will come to an end on Sunday, December 15, 25 days after the firm's November 20 IPO.
The expiration of the quiet period will allow the firm's IPO underwriters to release detailed research reports into the market to their institutional and retail clients, likely leading to a temporary rise in the price of NVGS shares. See our prior report on Navigator Holdings.
The IPO priced at $19 per share, the high end of the $17-$19 range. The stock has since been relatively quiet, maintaining a price between $19.48 and $22.67 per share; NVGS closed at $22.47 per share on December 6th.
The firm's underwriters, including the all star firm of Morgan Stanley, Jefferies LLC, Evercore Group, Global Hunter Securities, Fearnley Securities AS, and Stifel Nicolaus & Company, will seek to coax a more lively performance out of the stock with the release of positive detailed research reports at the end of this quiet period.
Both our past two years of research and the results of several academic studies have led to empirical evidence of a positive correlation between the quality and number of IPO underwriters and a temporary increase in the price of a firm's shares at the conclusion of the quiet period.
For example, extensive studies by our friend Professor Daniel Bradley, PH.D, C.F.A. at the University of South Florida in Tampa have shown that:
"Initiated firms experience a five-day abnormal return of 4.1% for firms with coverage. The abnormal returns are concentrated in the days just before the quiet period expires."
The increase in price typically becomes apparent a few days before the actual expiration of the quiet period, as investors buy up shares in anticipation of the underwriters' positive research release in the hopes of taking advantage of the potential price jump, placing upward pressure on the price of shares.
NVGS owns and operates a fleet of 23 handysized (15,000-24,999 cubic meters in volume) liquefied gas carriers, with an additional eight carriers under construction; this constitutes the largest fleet of its kind in the world. The small size of these vessels allows them to enter relatively small harbors to make deliveries and pickups that larger vessels could not. The newer vessels are extremely fuel efficient models that can be converted to use liquefied natural gas as fuel, and can therefore survive the increasingly harsh environmental strictures of carrier charterers.
NVGS transports liquefied petroleum gas, ammonia and petrochemical gases at a regional and international level for a variety of customers. NVGS competes with other handysize carrier operators; the largest of these are Naftomar Shipping and Trading (nine vessels in operation) and Solvang (five vessels in operation).
Former Lehman Brothers managing director David J. Butters serves as the Chairman, President, and CEO of NVGS; he'd been with the firm since 2008. He had been with Dick Fuld's now defunct bank for 37 years before its tragic and quick collapse ahead of the Great Recession.
NVGS's quiet positive performance since going public is likely to continue upwards in the period leading up to the end of the quiet period, and we expect a price bump. This may present a long trading opportunity for aggressive investors.
NVGS seems like a stable if not spectacular prospect at this point; the firm will probably grow steadily with increasing demand for liquefied gas.