3 Deals Trade Poorly In Debuts After Pricing Well Below The Range

by: Renaissance Capital IPO Research

For the third time in as many months, three deals debuted on the same day. The February trio -- mortgage REIT Zais Financial (NYSE:ZFC) at -6.1%, LP New Source Energy (NSLP) at -2.6%, and medical insurance provider Health Insurance Innovations (NASDAQ:HIIQ) at -2.1% -- performed poorly on their first day of trading. The March group did not fare much better, as communications company West Corp. (NASDAQ:WSTC) at -5.7% and mortgage REIT Five Oaks Investment (FOIC) at -3.3% traded down in their debuts. However, on-demand ad management firm Marin Software (NYSE:MRIN) at 16.1% attempted to redeem the group.

Although the April threesome of chemical producer Taminco (NYSE:TAM), clean energy REIT Hannon Armstrong (NYSE:HASI), and satellite services provider Intelsat (NYSE:I) hoped for a different fate, they failed to escape the trend. After all three companies priced well below the range, Taminco (-4.7%) and Hannon Armstrong (-9.2%) both fell and Intelsat (4.0%) traded up slightly. Taminco priced its offering at $15, below the range of $18 to $20. Intelsat priced its shares at $18, below the $21 to $25 range. Hannon Armstrong priced its shares at $12.50, below the $14-$16 range.

Larger Deal Sizes Could Not Break the Trend

Although it has generally been a strong year for IPOs, the poor performance of the April trio stands out from the aforementioned groups in February and March. With the exception of West Corp., which raised $426 million, none of the other five deals raised proceeds greater than $105 million. Hannon Armstrong's $167 million deal size was the smallest of Thursday's deals, with Intelsat and Taminco raising $348 million and $237 million, respectively.

Intelsat and Taminco Join West as LBO First-Day Fallers

In addition, Intelsat and Taminco broke the trend of strong first-day performances from LBO IPOs. Before Thursday, West Corp. was the only private equity LBO IPO to trade down on its first day in 2013. There have now been 11 private equity LBO IPOs, including standouts Bright Horizons Family Solutions (NYSE:BFAM) at 28.7%, Boise Cascade Company (NYSE:BCC) at 24.5%, and Fairway Group (NASDAQ:FWM) at 33.5%.

In what has been a volatile week for the stock market overall, it will be interesting to see what effect Thursday's IPOs have on the pricing of Blackhawk Network (NASDAQ:HAWK) and SeaWorld Entertainment (NYSE:SEAS), which increased its proposed deal size by 30% on Thursday morning. The pricing and trading of these two deals may signal whether Thursday's poor performance was an aberration or a indication of the current IPO market.