Mixed day for IPOs as Rio unit disappoints
NEW YORK (Reuters) - Investors proved to be selective as four U.S.-listed initial public offerings priced either below or at their expected ranges on Thursday evening.
The largest IPO came from Cloud Peak Energy Inc (CLD.N), the U.S. coal mining unit of Anglo-Australian miner Rio Tinto Plc(RIO.L) (RIO.AX), but its price fell short on concerns the IPO was more about helping Rio's balance sheet than funding Cloud Peak's growth.
Global Defense Technology & Systems Inc (GTEC.O) also fell short on fears that government contracts, which make up the bulk of its business, could dry up.
But fast growing companies Chinese discount hotel chain 7 Days Group Holdings Ltd (SVN.N) and on-line education company Archipelago Learning Inc (ARCL.O) were given a warmer reception, pricing in line with expectations.
Gillette, Wyoming-based Cloud Peak raised about $459 million but almost all of the proceeds will go to Rio Tinto, which will retain a 48.3 percent stake in Cloud Peak.
Rio Tinto is saddled with debt stemming from its 2007 acquisition of Canadian aluminum maker Alcan.
"There's investor push-back because it's (money) not going back to the company and it's not for growth. It's just a Rio Tinto bailout," said IPOdesktop.com president Francis Gaskins.
Analysts expressed concerns last week that Cloud Peak's IPO was overpriced relative to its peers' stocks and that it could face uncertain demand for coal.
Cloud Peak is the third largest U.S. producer of coal and owns surface mines in Wyoming and Montana.
The disappointing pricing sent Rio Tinto shares down about 1.9 percent in early trading in Australia.
Global Defense Technology & Systems, which raised $59.8 million in its IPO, drew 74 percent of its revenue in 2008 from contracts with the U.S. Department of Defense, but an analyst with advisory firm IPO Boutique said the company could suffer if the government cuts defense budgets.
Global Defense shares are set to begin trade on Friday on the Nasdaq under the symbol "GTEC."
An IPO, by healthcare information company HealthPort Inc, was to have debuted on Thursday, but the money-losing company shelved its IPO indefinitely.
ON THE BRIGHT SIDE
Chinese firm 7 Days priced its American depositary shares above expectations in the ninth U.S.-listed IPO by a Chinese company this year, with analysts crediting the chain's fast growth, despite losses in each of the last four years.
With 283 hotels as of September 30, up from only five in 2005, 7 Days said in its prospectus that it is the third largest economy hotel chain in China. It will use the IPO proceeds of about $111.1 million to pay down debt.
"They are building discount quality hotels for the increased number of leisure and business travelers throughout all of China not just the major metro areas," said Scott Sweet, a senior managing partner at IPO Boutique.
Another 77 hotels are on the way, according to the prospectus.
Archipelago Learning's performance will soothe private equity firms concerned that the IPO market has grown less hospitable to their efforts to sell stakes in companies they own through the public markets.
The Dallas-based provider of subscription-based online education raised about $103.1 million. Half of the shares in the IPO were offered by the company itself, and the other half by owners such as private equity firm Providence Equity Partners.
The busy day came as companies rushed to get their deals done before the U.S. Thanksgiving break. Currently, no further IPOs are on the calendar for pricing.
(Reporting by Clare Baldwin and Phil Wahba; Editing Bernard Orr)
