Intrepid Potash IPO: Soaring Shares Signal Fertilizer Bubble? 59 comments
April 24, 2008
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Get your noseplugs ready. According to Bloomberg, Intrepid Potash's (IPI) surging shares on its first day of public trading may be a sign of a nascent fertilizer bubble:
After surging 58 percent in its first day of trading, Intrepid -- the largest U.S. producer of potash, according to its IPO prospectus -- is valued at 201 times last year's pro-forma earnings of 25 cents a share.This makes the Denver-based company's shares more costly than those of Cisco Systems Inc., the world's biggest maker of computer-networking equipment, when the Internet bubble reached its high point in March 2000. Cisco peaked at 193 times profit, according to data compiled by Bloomberg.
Bloomberg goes on to suggest that the stock's impressive first day of trading was not surprising, given rising potash and other fertilizer prices.
WSJ's Marketbeat blogger David Gaffen adds that :
After the 57.5% first-day gain in Intrepid Potash Inc. on Tuesday, other major potash companies were pulling back in activity Wednesday, including Potash Corp. of Saskatchewan, Mosaic Co. and Agrium Inc. Other agricultural names were lower as well.
Finally, Kevin Price notes that:
[Tuesday's] furious IPO of Intrepid Potash, coming on the heels of a truly parabolic run in the group over the last several weeks, does have a certain late-in-the-game feel, doesn't it?
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This article has 59 comments:
They bash everyone including Visa, Apple and now IPI....
This stock is going all the way to the top.
Shame on you, what kind of investors are you?
She's the kind of investor that tries to show you that nothing goes up forever. Fertelizers stocks are in a bubble that sooner than later will explode and take kids like you down the drain with it.
This company is going to produce more potash this year than last year and will continue to increase its production for next couple of years.
THese guys at seeking alpha are short/negative on these new IPO of visa and IPI. So if POT; MOS; CF; AGU are all over $90... so your telling me that IPI the largest producer of potash in America is not going to be over $60. You dont need a PhD to make that determination.
BUY BUY BUY .....
Potash prices are supposed to go to $1000/tn, showing that China and India are willing to pay higher amounts for their yearly contracts because there is an increasing demand for potash.
Furthermore, with the developing world set to consume an ever increasing amount of food, and with potash supplies carefully controled by the few companies in the world that produce it, the future does definitely look bright. I think the 'hype' around potash is justified to a great extent.
I completely agree with you. Seeking alpha has been bashing visa when it was at $62-63 now its at $71-72 so you dont see any more articles out there for visa from SA. The same is true about IPI they are going to have about 5-6 articles come in the next several weeks bashing IPI. I think the only reason why they do it is to get readers. Every articles is in favor of Visa and IPI besides SA, so people come to read the "other" side to the story. I will admit, Im one of the people that like to read the "other" side to a story, as it keeps me on my toes and give the downside to a good stock.
POT isn't deserving a PE of 50, no MON or MOS.
Yes, the earnings are stong, very storng, but what we've got here is an anamoly.
I remember telling a trader to short the Dry Bulk sector back in Nov. 07 and I got the same respond I see here. DRYS is growing like crazy but it didn't justify yet a price of $140 and that's why the air came out with a vengance in the following months.
The same will happen here. No stock ever went up vertically like that with no healthy correction. POT is a very good stock JUST got a little bit ahead of itself and it will correct anytime soon. And so is the whole sector - MON, MOS, BG, CF, AGU etc.
It maybe started already, put your stop losses is all I can add...
The best thing though is that the 679,000 ton sales over three quarters only represents 57% of their total MOP mining capacity.
You gotta love their prospects!
I wonder if some of you are still puffing your stock so the poor little investors get in while some of you are getting out!
Yes, get in now buy high! buy high!
Yes, you are probably investing the money you got left from having just sold banks!
I think the author is right to raise the question; at some pt. the commodities buble will pop; maybe not tomorrow, but pop it will. Does this market look past its peak? Looking risky to me!
RECENT COMMENTS:
Potash-POT CEO says forecast does not include $1,000/ton for Potash-Bloomberg
Apr 24, 2008 1:34:00 PM
Follow-up: Potash markets remain essentially sold out@JPMS
Apr 23, 2008 2:04:00 PM
View Additional Profiles
JP Morgan said potash price of $1000/mt will likely provoke a customer response but that global potash markets are essentially sold out. The analyst believes a more more measured pace of increases will smooth customer acceptance.
Citigroup said BPC/Russia raised potash prices to $1000/ton from a recent spot price of $750/ton effective July 1. The firm expects North American producers to follow.
Anything over $550/ton puts IPI investors in the money. Think Q2-Q3 08. We haven't hit North American planting season yet.
Best Regards
Sure- the 'bubble' is about to burst. I guess the fact that the entire developing world is eating twice as much as it did a decade ago doesn't matter. Sure- the fact that world population will grow from 6.5 bill to 9.5 bill in the next 25 years doesn't matter. Sure- the food crisis that is in danger of creating civil wars across the globe is because Harry bought himself a futures contract on wheat.
Get real- its like the neanderthals that cut up V (which has made me 6 figures in the last month alone). I bought IPI on the first day at 45.25 and have no doubt that this will be a 100$ stock within a year. Have you seen the earnings of Potash and Mosaic?? These companies are minting money.
China consumes 25% of the worlds potash and produces only 5%- this market alone is driving the price- as it did in nickel, iron ore, and copper. The fact is that we have reached peak oil, peak food, and peak metals. Throw out your boom and bust cycles- and realize that we have reached 'peak world'. Years ago- it was determined that the world's resources would be drained irreperably by population growth alone. It was detimined that resources would be unsustainable at 8.5 billion people. The problem is that these figures did not take into account the global wealth boom. With increased consumption that improved living standards have brought the devloping world the unsustainability figure is now- ready?
HERE ALREADY
Get used to higher prices for oil, metals, food, and ====== higher prices in the futured. Welcome to the new world order.
Now- as far as Potash- and specifically IPI- you would have to be mentally retarded to NOT see the value of this company
I see the pattern- I am going to give you guys the best stock trading tip of your entire investing careeers:
BUY EVERYTHING THAT SEEKING ALPHA TRASHES- you will make a fortune :-)
"Abby is a US born writer"- wow! I guess if she was Canadian we shouldn't listen to her. With the massive 2 sentance bio she posted we should really give her credence
Yes sirrrr.....I agreee with you.
There is a pattern here at seekingalpha. I think they are trying to draw readers by posting the downside to a highly anticipated sought after stock. However there "downside" to the stock is completely BULLSHIT and completely rediculous. They dont post any projected earning b/c they know the stock will be $60 conservatively in the next few months (if not weeks). They also dont post any valuable FACTUAL information that would entails readers to make some sort of BUY/SELL decision....so they post extreme "speculations" and opinion which is analogous to the world ending. At first i found them informative to hear the "other side of the story" but now i find these articles to be somewhat manipulative..
Although i am not a stock analyst or work for any big finance company....it doesnt take a genius to see that if POT, AGU, CF, MOS all competitors of IPI and are trading at record highs (up over 50% from last year) than IPI should be right there with them...
As a physician i need to prescribe some sort of anti-psychotic medication for the writers at seekingalpha....b/c they are completely delusional..
Apparently the major expense of potash is that of transportation.. but apparently IPI has that covered since most of their customers are in the USA... they have a lower expense compared to that of POT or any of the other potash companies.
So this comapany has huge potentials in a agricultural sector...and i see nothing but positives about this company..
My predictions this stock will hit $90+ by the end of the year... even if it just hits $70 (extremely conservative) we all WIN.
On top of that the story of IPI is an Alice in Wonderland fable- the original principals were looking for oil and came upon Potash. IPI used horizontal oil drilling technology to exploit Potash mines that were thought to be cost prohibitive- and voila! - they got into the Potash biz at the absolute best time in history to do so.
Recently IPI has negotiated the acquisition of additional mines and plan to use horizontal and conventional techniques to exploit them.
On top of that with oil at 118- they will not only be able to sell every ton of potash they can right her in the US- they will have a backlog of orders till 2040- and on top of that they are major langenbite producers as well.
I'm not saying that IPI will be a 200 stock like POT- but I think once people realize that the agricultural demand is here to stay- I could see IPI hitting 100 within the next 6-8 months.
Unlike gold, people can't do without food and for every 1dollar potash investment farmers yield 3-
Bottom Line- IPI is a winner- and one of only 14 stocks I have ever recommended that my wife buy
MOS market cap = $58.25B
IPI market cap = $1.8B
you make the call ! SA is a POS blog. They blow like the wind, kinda like a girly-man.
You forgot to mention the other competitors:
AGU market cap= 14.06 billion
CF market cap = 8.12 billion
Now that i look at the market cap more closely b/c of your last post....and the future prospects of this company as far as the acquistions of new mining and increased price of potash along with being the largest producer of potash in USA.....I dont see a reason why this company wont double or triple wth 5-6 billion within the 1-2 years....or within months. Which means that the stock will likely split and still get to $70-80 dollar.
Wow.... looking at all the positives and future prospective, Im glad Im on this train
B. I always love how people think that tech stocks that usually produce nothing that we NEED are okay at huge multiples, but companies that give us necessities should sell at lower multiples. Where's the logic?
C. I can't eat an ipod nor a router. So which companies are REALLY worth more?
the floating share is about 30 million so your correct... it is limited which is the reason i believe/hope that they may split within next several year.
IPI currently produces about 750,000 tons of potash, however their name plate is 1.2 million tons.... with the price of potash hitting $1,000 and the high demand to supply ratio.....all i see is this stock sky-rocketing to the top.
What are your prediction on what the stock will in 1 year???? I truly believe it should hit 90+ within 1 year and possible 150 in 2 years....
I like the marketcap breakdown-
I like the one talking about the fact that tech stocks that help connect missing socks can trade at high p e ratios- but not companies that actually produce a product we need.....
I like the discussion about farm demand-
I like the discussion of price increases
One last thing- don't forget IPI also mines Langenbite- and Langenbite has huge demand as well which scews (in our favor) the market share- as if you add the langenbite and potash- you have a much stronger company.
On top of that IPI did something that not a lot of people are talking about- before they started telling everyone that they used horizontal drilling (they were the first to do it)- they went around tying up additional acreage of old potash mines. Guess who they bought some of their mines from? POT
Expect them to come on strong and start cutting into global market share by working existing mines, re-opening others, and developing entirely new ones. As a public company they will also use shares a currency (as all miners do) to tye up even more production.
One last last thing- and people also forget this- metals and minerals that China doesn't have yet consume a lot of are the ones on a tear right now- and I don't expect Potash prices to drop anytime soon.
China alone is consuming approx. 25% of the world's potash- yet have less than 5% of the world's supply.
GOD BLESS THE CHINESE
Regards
Jos
Hey whats going on. This is my hobby or my secondary job. However i have gotten more interested in this than the medical profession in the last several months. In fact i look at these and read about the report as much as i can.
Good move to be in Visa and IPI. Both are great companies that you will not regret investing in. I too own only 3 stocks, with major of my money in Visa and IPI. The third one is EJ (but i have less than 5% of money in that). IPI and Visa are going to be companies in which you will probably see the stock price at $150-200 in several years. IPI, all last week too a hit which is good and healthy for a stock. Look for IPI price to hit about $60 sometime this week or next week. The earning report should be comming out in the next several weeks, so what ever number of shares you want to buy, buy now before the earning report. B/C once the earnings comes out this stock will start sky rocketting. Now thats my take its no guarantee.
V winner has been in this bussiness for a long time and he is 10X more knowledgable in this field than me. If you want to be on an active blog about IPI go to google finance and type in IPI and click on "discuss IPI". there is a post from a user: glgolds which is really informative:
finance.google.com/gro...#
finance.google.com/gro...
higher oil price leads to higher commodity price and higher commodity price will lead into high potash. correct me if I'm wrong. and i do believe that we will have higher oil price within 2 more next year.
Regards
Jos
I also have faith in the book runners and co-managers of the IPO. They are the cream of the crop and will help to guide this company forward. the 4.5M over alotment was a nice thank you note. GL
I am wondering when the earnings report is going to come out. I am concerned about the P/E ratio. Currently the P/E ratio from last years earnings is over 100. HOwever the price of potash has gone up and the future prospects of this company is great with the opening of new mines and increase production of potash. The price of potash will likely be around $1000 by the end of the year which will go to the bottom line. Additionaly the limited number of shares offered 30 million will add to the stock value. Lets hope the earnings report which comes out is good.
IPI website indicate that they will let investor know this week when earnings will be released. I am expecting sometime in May no later.
I think I read in the prospectus that $ for MOP/ton has already doubled from ~$250 to over $500. so it should be ok, forecast will be critical and I hope someone in IPI management knows how to articulate it well in the CC, when ever that maybe.
GL...
Anyhow, I think this earnings report that will be comming out will not be good but NOT GREAT b/c the price of potash has went up in April. So the quaterly earnings report will not include the jacked up prices, although they were higher than last years 4Q potash prices. Did the prospectus say the price from $250 to $500 was for 1Q or 2Q.
Anyways you said you saw the forward P/E of 12 on yahoo. I need to check that out. Hopefully they announce soon when the earnings report will come out.
I meant to say that the earnings report that will be comming out will be good but NOT GREAT..
I have to be honest though that a possibility of a "bubble" bursting is making me nervous. I would be a bad investor if I did not think about the worst.
Just to answer some of the arguments that sound great and sure thing:
Most peoples' argument is: Population is growing, demand rising, food shortage etc. etc.
- Remember that before dot com bubble people had similar arguments, such as: "online users rising xxxx%/year", "online purchases are rising by xxxxx%/year", "how can this be a bubble?" etc. Well the bubble did burst and it took down almost every tech stock with it, whether good or bad. When there is a panic, people don't think rationally, and don't look at things like P/E.
Just before housing bubble, the same story, "baby boomers retiring", "population growing", "real estate only goes up", etc. and yet the threat came from unexpected source, the Subprime mortgages and their repackaging as investment products. Despite the fact that some areas saw very little foreclosures, the bubble hurt the entire housing market, due to panic, inability to issue mortgages, inability to sell mortgages, and increased supply of newly built homes that no longer had demand.
Now, call me paranoid but can anyone tell me that they are so smart that they have thought through, and over-ruled all possible threats that can cause commodities (yes, Fertilizer IS a commodity however you want to spin it) market to crash?
No, as an investor I need to think about these things and to me, most valuable article, or comments to the article is the one that considers all the threats, rather then those that simply cheerlead, or bash particular market without, a thorough risk analysis.
So by all means folks, be bullish on IPI (I am), but be a conservative at the same time, and suggest possible threats.
The long term trend of increasing potash prices has accelerated recently. For example, our posted price for red granular potash in Carlsbad, New Mexico has increased 132% from $217 per ton on September 30, 2007 to $503 per ton as of April 1, 2008. Actual prices realized in the market vary due to the timing and receipt of orders, among other factors.
here's the link to Yahoo financial info on IPI: (under Key Statistics)
finance.yahoo.com/q/ks...
Yahoo discloses that info is gathered from Thomson and Capital IQ (Division of S&P) for what its worth.
GL..
A point to consider: bubbles are opportunities, until they pop...:))
GL..
biz.yahoo.com/bw/08050...
GL..