US life insurer Symetra is the biggest of five expected market debuts next week, a grab bag of initial public offerings kicking off what many hope will be a robust IPO year. But several of next week's deals are quite small. "There are no blockbusters next week," said IPO Boutique Senior Managing Partner Scott Sweet.
Not seen indicative of 2010 market China, with a number of companies expected to float shares on US markets this year, will be represented by China Hydroelectric Corp and ship fuel supplier Andatee China Marine Fuel Services Corp. China Hydroelectric expects to raise about $49.6 million while Andatee is aiming for roughly $17.5 million.
Investors have historically shown little interest in deals worth less than $100 million, analysts said. "I'm not sure if their performance is really going to set the tone for the IPO market. I don't think whether they price well or poorly is really going to make much of a difference because they are so small," said Paul Bard, an analyst with Connecticut-based Renaissance Capital.
In fact, many of the more promising IPO companies may be waiting for their full 2009 financial reports, which means some of the best deals are unlikely to move forward until the end of February, said Bard. Cellu Tissue Holdings Inc will only raise about $124.8 million at the midpoint of its expected pricing, and most of that will go to private equity backer Weston Presidio LP.
Cellu, whose paper products are used in toilet paper and paper towels, expects to net only $29.4 million, which it will use to repay debt. Terreno Realty Corp, a real estate investment trust that has not yet identified any acquisitions and currently has no property assets, is looking to raise $300 million.
Symetra, is worth about $351 million and is the strongest deal of next week, analysts said. But the company had to carefully tweak its terms to lock in its potential success. Warren Buffett's Berkshire Hathaway Inc and White Mountains Insurance Group Ltd, are both retaining their entire, majority stakes. The company also cut the number of shares it plans to sell and the price range.
"I don't think these deals will be the litmus test for the balance of 2010," said David Menlow, President of IPOfinancial.com. Analysts will have to wait to test their hypothesis that the 2010 IPO market will open the door for smaller companies that have high rates of growth.
Still, the relatively high volume of IPOs in January is a good sign. Beyond next week, there are three the following week, including two more China deals: a $162-million IPO for real estate company IFM Investments Ltd, and a $108-million offering by polysilicon manufacturer Daqo New Energy Corp. These will be better indicators, Bard said. Polysilicon is a key ingredient in solar panels. By comparison, there were no IPOs in January 2009, when the markets were still reeling from the financial crisis, and only one per month in February and March, according to Thomson Reuters data.