BrightSource Energy Dims The Lights On Its IPO

Includes: FET, LUCA, MRC, NRKM
by: Asset Investing

BrightSource Energy is a leading manufacturer, operator and distributor of solar panels. The company, which originally filed to go public nearly a year ago under the proposed symbol "BRSE", has decided to withdraw its plans to sell its shares. In a press release dated April 11, 2012 the company decided to not go forward with its public offering, citing "continued market and economic volatility", which are not optimal for publicly trading their shares.

Some of those economic conditions that BrightSource Energy cites in its press release are no doubt related to the low price of natural gas. As natural gas prices have fallen below $2.00 and continue to drop, that source of energy becomes a lot cheaper to use than solar power. The cost being roughly $0.0065 per Kilowatt Hour compared to solar $0.10 to $0.20 per Kilowatt Hour.

The depressed energy sector as a whole has decreased interest in new energy company offerings, especially those with unproven technologies and a short or non-existent history of earnings. While retail investors have maintained a strong interest in IPOs, institutional investors have continued to shy away from the more speculative bets.

In the first quarter of 2012, 44 companies have priced shares. Compared to just 33 for the same period last year. While the size of the deals is much smaller this year, many believed this was still a positive sign for the IPO markets. Alternative energy stocks have failed to capitalize on the increased interest in public offerings and what many thought were the beginnings of a hot IPO market.

Luca Technologies (LUCA), which uses microorganisms to enhance natural gas recovery has delayed its IPO for over two weeks and was originally supposed to go public on April 2. Enerkem (NRKM), which develops chemicals and biofuels from municipal solid waste, has also been delayed for almost two weeks.

The interesting paradox is the hot sector of cloud computing. If cloud computing truly is the wave of the future and the companies start living up to their expectations, they will have to begin building massive server farms and data centers. Those require a substantial amount of power and as we saw when Google (GOOG) released its carbon footprint information last year, alternative or green energy is the preferred method of powering those data centers.

BrightSource Energy did have some positive news in its press release, stating that the Ivanpah project was on schedule. When it is completed it will be the largest solar project in the world and BrightSource has eluded in previous statements that they might not survive if this project was not completed.

BrightSource was also an actively traded stock on the private markets, so expect that to continue until it finds more favorable market conditions. In the meantime, you can expect more companies to withdraw their public offerings in favor of better market conditions. There are still 157 companies that have filed with the SEC, but have yet to go public.

Aleris, which makes aluminum products also shelved its IPO on Thursday, but kept the registration on file with the Securities and Exchange commission so it may still go public at a later date.

Three IPOs did manage to go public with these market conditions. Forum Energy Technologies (FET) makers of oil and natural gas drilling equipment and services priced at the high end of the range and was up 8.8 percent on its first day of trading. While MRC Global (NYSE:MRC), another supplier of products to the oil and gas industry, priced at $21.00 and finished the day virtually unchanged. Oaktree (NYSE:OAK), a financial services and management firm priced at $43.00, the low end of the range. Oaktree opened $2.00 lower but manage to climb back to $42.39 at the end of the day.

BrightSource Energy's press release can be found here. Some information in this article was taken from BrightSource Energy's S1 filing here. Energy conversion data was used from this page. And IPO offerings and stats are according to the Wall Street Journal.

Disclosure: I am long LUCA.