IPO market ends March roaring like Lion
As the month of March ends on Wall Street, tech stocks are getting hot. That's good news on many levels.
High-Profile IPO of SS&C Technologies Is Lined Up
March's IPO market promises to go out like a lion this week, with a high-profile deal scheduled to trade on the last day of the month.
Software company SS&C Technologies Holdings Inc. of Windsor, Conn., is aiming to raise as much as $161 million through a listing on Nasdaq under the symbol SSNC, but if recent pricing trends are any indicator, it could fetch more. The stock, which has an expected price range of $13 to $15 a share, probably should command $18 a share, according to research by Morningstar Inc. analyst Brad Meeks.
SS&C is no stranger to the public markets; it was traded under the ticker SSNC until 2005, when it was taken private in a leveraged buyout valued at $942 million, or $37.25 a share, including $381 million in equity from Carlyle Group. Carlyle and SS&C management contributed about $8.64 a share in the buyout. At the midpoint of its expected price range, $14 a share, the company will command a market value of $890 million after this initial public offering.
The pipeline of European companies raising money through IPOs is also expected to expand. Dutch semiconductor company NXP, owned by a group of private-equity investors including Kohlberg Kravis Roberts & Co. and Bain Capital, plans to raise more than $1 billion through an IPO, according to people familiar with the situation, making it one of the year's largest deals. NXP was spun off from Royal Philips Electronics NV in a 2006 leveraged buyout.
Over the past week two German companies, chemicals distributor Brenntag AG and cable provider Kabel Deustschland Holding AG, raised $1 billion and $1.2 billion, respectively, through IPOs.
SS&C's specialty market is familiar territory on Wall Street: It makes software and services that automate complex functions for a range of financial clients, including banks, asset managers, hedge funds and pension funds. Its products touch everything from trading and portfolio management to accounting.
The financial-services clients that SS&C serves have gone through a rough upheaval over the past two years, and that caused a 3% decline in the company's revenue in 2009. However, lower operating expenses allowed it to squeeze out a 1% increase in net income compared with 2008. But what is most likely to turn investors' heads is the company's ever-growing operating margins: 24.8% at the end of 2009, up from 23.2% in 2007.
SS&C filed for an IPO in 2007, but withdrew it a year later, citing market conditions. It is to investors' benefit that the deal has aged a bit more in Carlyle's cellar: Its consolidated total debt pre-IPO is now 3.17 times consolidated earnings before interest, taxes, depreciation and amortization, compared with 6.43 times when it was acquired. Post-IPO, when most of its proceeds are used to pay down debt, that ratio will go to 2.48. Operating margins in 2007 were 19.6%, a full five percentage points lower than they are now.
SS&C is the latest in a string of promising tech-oriented companies to reach the U.S. markets. Two weeks ago, online retirement adviser Financial Engines Inc. rose 44% on its first day of trading, and last week, semiconductor company MaxLinear Inc. jumped 34% on its debut. Ever since the middle of the month, the U.S. IPO markets have taken on a more positive tone, with the majority of deals pricing within their expected ranges—in contrast to most pricing below in January and February—and trading higher.
The result is the busiest month so far this year, with nine IPOs completed through last week, and the possibility of a few more, including SS&C, before March is over. Bankers attribute the shift in March to a combination of the types of companies coming public and an overall improvement in the broader stock market, which greatly influences IPO performance. As long as indexes don't take a sudden dive, they expect deal flow to be steady in the months ahead.
The next few months "could be as busy as March. There is still receptivity on the investor side, and we've been seeing good demand for the transactions we've been working on," says Andy Sanford, head of equity capital markets at Wells Fargo & Co.
High-Profile IPO of SS&C Technologies Is Lined Up
March's IPO market promises to go out like a lion this week, with a high-profile deal scheduled to trade on the last day of the month.
Software company SS&C Technologies Holdings Inc. of Windsor, Conn., is aiming to raise as much as $161 million through a listing on Nasdaq under the symbol SSNC, but if recent pricing trends are any indicator, it could fetch more. The stock, which has an expected price range of $13 to $15 a share, probably should command $18 a share, according to research by Morningstar Inc. analyst Brad Meeks.
SS&C is no stranger to the public markets; it was traded under the ticker SSNC until 2005, when it was taken private in a leveraged buyout valued at $942 million, or $37.25 a share, including $381 million in equity from Carlyle Group. Carlyle and SS&C management contributed about $8.64 a share in the buyout. At the midpoint of its expected price range, $14 a share, the company will command a market value of $890 million after this initial public offering.
The pipeline of European companies raising money through IPOs is also expected to expand. Dutch semiconductor company NXP, owned by a group of private-equity investors including Kohlberg Kravis Roberts & Co. and Bain Capital, plans to raise more than $1 billion through an IPO, according to people familiar with the situation, making it one of the year's largest deals. NXP was spun off from Royal Philips Electronics NV in a 2006 leveraged buyout.
Over the past week two German companies, chemicals distributor Brenntag AG and cable provider Kabel Deustschland Holding AG, raised $1 billion and $1.2 billion, respectively, through IPOs.
SS&C's specialty market is familiar territory on Wall Street: It makes software and services that automate complex functions for a range of financial clients, including banks, asset managers, hedge funds and pension funds. Its products touch everything from trading and portfolio management to accounting.
The financial-services clients that SS&C serves have gone through a rough upheaval over the past two years, and that caused a 3% decline in the company's revenue in 2009. However, lower operating expenses allowed it to squeeze out a 1% increase in net income compared with 2008. But what is most likely to turn investors' heads is the company's ever-growing operating margins: 24.8% at the end of 2009, up from 23.2% in 2007.
SS&C filed for an IPO in 2007, but withdrew it a year later, citing market conditions. It is to investors' benefit that the deal has aged a bit more in Carlyle's cellar: Its consolidated total debt pre-IPO is now 3.17 times consolidated earnings before interest, taxes, depreciation and amortization, compared with 6.43 times when it was acquired. Post-IPO, when most of its proceeds are used to pay down debt, that ratio will go to 2.48. Operating margins in 2007 were 19.6%, a full five percentage points lower than they are now.
SS&C is the latest in a string of promising tech-oriented companies to reach the U.S. markets. Two weeks ago, online retirement adviser Financial Engines Inc. rose 44% on its first day of trading, and last week, semiconductor company MaxLinear Inc. jumped 34% on its debut. Ever since the middle of the month, the U.S. IPO markets have taken on a more positive tone, with the majority of deals pricing within their expected ranges—in contrast to most pricing below in January and February—and trading higher.
The result is the busiest month so far this year, with nine IPOs completed through last week, and the possibility of a few more, including SS&C, before March is over. Bankers attribute the shift in March to a combination of the types of companies coming public and an overall improvement in the broader stock market, which greatly influences IPO performance. As long as indexes don't take a sudden dive, they expect deal flow to be steady in the months ahead.
The next few months "could be as busy as March. There is still receptivity on the investor side, and we've been seeing good demand for the transactions we've been working on," says Andy Sanford, head of equity capital markets at Wells Fargo & Co.
Labels: capitalism works, hot stocks, ipo market, wall street
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