IN PICTURES: How To Make Your First $1 Million
Some Examples
RailAmerica (NYSE: RA) was IPO'd in mid-October 2009 and came to market at less than $15 per share, below the expected range of $16 to $18 per share. The company owns 7,500 miles of track in the U.S. and Canada and was taken private several years ago by Fortress Investment Group (NYSE: FIG). RailAmerica closed at $13.67 on October 23. The company's critics cite a high debt load and still-sluggish traffic volume for the railroad industry, which will hurt earnings despite its niche network of rails.
Dole Food (NYSE: DOLE) sold 35.7 million shares at $12.50 to the public, raising $446.4 million. This was also considered a poor debut, as the expected pricing was from $13 to $15 per share. Dole closed at $12.28 on October 23.
AGA Medical Holdings (Nasdaq: AGAM) manufactures medical devices for the heart and is being IPO'd by Welsh, Carson, Anderson & Stowe, a private equity firm that is its largest shareholder. Underwriters cut the pricing range by 23% to $15 to $16 per share before bringing it to market. It eventually priced at $14.50, which is where it is currently trading.
Secondary Offerings
Some secondary offerings are doing well, particularly in the energy sector. GMX Resources (NYSE: GMXR) issued equity and a convertible note to help fund its capital program. The company had to increase the number of shares offered from 5.75 million to 6.95 million due to strong interest.
Brigham Exploration (Nasdaq: BEXP) also issued equity to fund its Williston Basin development program, and it increased the number of shares issued from 14 million to 16 million due to strong demand. Energy always seems to catch investors' interest, possibly due to the strong fundamental case for oil and natural gas long term.
Closing Thoughts
The recent poor performance of several IPOs in a wide variety of industries could be a sign that the mini-bull market is nearing exhaustion. It may be that the market needs more than the illusion of optimism provided by companies beating very low guidance to power it higher. (To learn more about IPOs, check out The Murky Waters Of The IPO Market.)
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