A Review Of Last Week's IPOs - Part III

|
 |  Includes: EAC, FET, MRC
by: The Value Investor

The Initial Public Offering market remains red hot with the much anticipated offering of Facebook (FB) just weeks away and equity markets trading around four-year highs, despite this week's pullback. This week I will review the initial public offerings for the week of April 9 - 13.

Last week's IPO's

Some 4 companies decided it was time to go public last week. Erickson Air-Crane Incorporated (EAC), Oaktree Capital Group LLC (NYSE:OAK), MRC Global (MRC) and Forum Energy Technologies Inc. (FET) took the jump and got their listing.

On average the IPO's were not a great success with an average first day return of a mere 2%, entirely driven by Forum Energy Technologies which returned 8.8% on its opening day.

In total the sample above managed to raise some $1.3 billion in order to finance their business objectives and growth plans, or provide existing shareholders with a cash out.

Click to enlarge

Erickson Air-Crane

The company is a manufacturer of its Erickson S-64 Aircrane being a heavy-lift helicopter, focusing on firefighting, harvesting and construction jobs. For 2011 the company generated $153 million in revenue and reported a $7 million profit, which values the company at 1.8 times annual revenues and 12 times earnings. Initially the company tried to sell 5.35 million shares at a range of $13-$15 per share, but it revised this to 4.8 million shares in the $8-$9 range. The net proceeds of the issue which amount to $32 million will predominately used to service Erickson's large debt balance of $124 million.

Oaktree Capital LLC

Oaktree is a alternative asset manager focusing on distressed debt with some $75 billion assets under management. The company initially tried to sell 11.25 million shares in a $43-$46 range, but settled for an offering of 8.8 million shares at $43. All proceeds of the company are not used to strengthen the business, the shares being sold belonged to corporate insiders. The valuation seems steep given that the company only reported revenues of $156 million for 2011 and reported a $96 million loss. The company went public for a valuation of some $6.4 billion and numerous report mention that competitor Carlyle Group is contemplating an offering as well, which would value the private equity firm at $7.5-$8.0 billion.

MRC Global

The holding company distributes pipes, valves and fittings related to the energy industry. In 2011 the company reported revenues of $4.8 billion on which it managed to squeeze out a $29 million profit. The company managed to sell 23 million shares at the low end of the $21-$23 trading range. Some 25% of the proceeds are insider sales indicating that gross proceeds for the company come in at some $360 million, which is welcomed as the company operates with some $1.5 billion in net debt.

Forum Energy Technologies

Forum, the provider of equipment of services to the oil and gas industry managed to sell 18.9 million shares at $20 a share, the high range of its offering. Some 5.0 million shares are sold by selling stockholders with the remaining of the proceeds going to the company itself. This IPO is the only "successful" public offering this week. Not only did shares jump 8.8% on their first trading day, the offer price of $20 was at the high end of the initial guided price range of $18-$20.

Conclusion

The initial public offering market saw its second "soft" week with some cancelled public offerings. Aluminum producer Aleris cancelled its offering despite strong results from Alcoa while solar producer BrightSource cancelled its offering due to market conditions as the solar industry is currently going through its darkest days.

Furthermore the four offerings mentioned above were not a great success, with the exception of Forum Energy Technology. With a correction taking place under renewed stress from the Eurozone, the initial public offering market is losing some of its strength ahead of Facebook's rumored $10 billion offering.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.