A Tale of Two Public Offerings

New York Times DealBook, April 24, 2008:
With the credit market still in lockdown and the equity market on a downswing, taking a company public might seem a bit loopy. Two companies that actually took the plunge this week, American Waterworks and Intrepid Potash, exemplify how bipolar this market has become.
There has been much hand-wringing about the horrible environment for initial public offerings — but the reality is a bit more nuanced. At $24 billion, the volume of new issuances in the United States actually doubled in the first quarter from a year earlier. But if you exclude the gargantuan stock sale from Visa, the total value in the first quarter was about $5 billion, down 58 percent from last year, according to Dealogic.
Those that did brave the market have seen wildly different outcomes. Take American Waterworks, which hit the market Wednesday. The spinoff of German utility giant RWE might normally have attracted a lot of attention from risk-averse institutional investors — especially now that risk is out of fashion.
But it was far from popular, bankers working the deal said. RWE priced the stock at $21.50, 40 percent below what it originally thought it could grab last year. And investors were still not impressed — the shares fell as much as 6 percent Wednesday morning.
On the flipside, Intrepid Potash, which makes fertilizer, saw its stock pop as much as 60 percent in its debut Tuesday. Commodity-crazed investors fell over each other to buy a piece of the agricultural company, whose main product, potash, has seen a 131 percent increase in value in just seven months.
This wild market is scaring a lot of companies from going public. A total of 83 companies withdrew their initial public offerings this year and another 24 have delayed share sales, according to Ernst and Young. That is a record.
At this pace, the long-anticipated public offering from private equity giant Kohlberg Kravis Roberts might be sitting on the shelf for many more months to come.