Last Friday, Law360’s Tom Zanki spoke to Sichenzia Ross Friedman Ference LLP Partner Gregory Sichenzia about Ferrari’s upcoming IPO slated to be valued at $1.5B. Beyond the luxury car maker’s IPO, experts (including Sichenzia) are predicting that the IPO will cool down:
“The environment has changed,” Sichenzia Ross Friedman Ference LLP partner Gregory Sichenzia said. “It’s a harsh, dry terrain out there. It’s certainly not pre-August.”
Read the live article here or read the full transcript below:
Seven Firms Set To Guide $1.5B In IPOs Led By Ferrari
By Tom Zanki
Law360, New York (October 16, 2015, 7:54 PM ET) — Seven firms could guide initial public offerings approaching $1.5 billion in the week of Oct. 19, a relatively light lineup dominated by Ferrari’s planned IPO as the luxury car brand hopes to ignite a cooling market stung by reduced pricings, delays and soft debuts.
Fiat Chrysler Automobile NV’s planned spinoff of Ferrari, guided in the U.S. by Simpson Thacher & Bartlett LLP, calls for selling 17.2 million shares between $48 to $52 under symbol RACE. At midpont, the offering could raise $859 million and value the company at $9.4 billion, making it among the largest issues this fall.
Netherlands-based Fiat Chrysler, which is spinning Ferrari into a standalone company as part of broader restructuring plans, is also being advised by Loyens & Loeff NV on Dutch law matters.
Ferrari’s IPO is followed by private-equity backed Multi Packaging Solutions International, guided by Latham & Watkins LLP, which could raise $300 million if all 18.75 million shares sell at the middle of its $15 to $17 range. The global maker of paper packaging products is selling 12.5 million of those shares, mostly to repay debt, while owners TheCarlyle Group and Madison Dearborn Partners LLC are trimming their stakes, selling a combined 6.25 million shares.
The week’s pipeline sharply diminishes after those two offerings, mostly consisting of technology or life science companies expected to raise below $100 million. Capital markets attorneys expect the downtrend to carry through the remainder of the year, given the recent spate of offerings that have priced below range or postponed altogether, signs that broader volatility has cooled a once sizzling IPO market.
“The environment has changed,” Sichenzia Ross Friedman Ference LLP partner Gregory Sichenzia said. “It’s a harsh, dry terrain out there. It’s certainly not pre-August.”
Dimension Therapeutics Inc. is among those embarking on that terrain. The young biotech developing treatments for rare liver disease plans to price an offering that could raise $83 million, advised by Goodwin Procter LLP. Swedish cancer biotech Oasmia Pharmaceutical AB — guided by Sichenzia Ross Friedman Ference LLP — which had previously planned to price a $20 million offering the week of Oct. 12, is also in the mix.
The offerings come as the biotech segment, along with the wider health care industry, continues to produced an outsize share of IPOs but at a much slower pace than earlier this year. SynCardia Systems Inc., a maker of depression-treating therapies, on Wednesday withdrew a $27.5 million offering that was being guided by Cooley LLP.
Sichenzia said biotechs may not rebound until next year, noting than an annual J.P. Morgan conference for health care industry investors held in San Francisco each January typically kickstarts new deals.
“To the extent the market is being driven by health care and biotech, hopefully the window will open again in January and it will stay open long enough to get deals done,” Sichenzia said. “Right now it’s lukewarm.”
The life science industry has produced 10, mostly small initial public offerings since the week of Sept. 28, showing that the window hasn’t shut entirely. Cooley LLP partner Charlie Kim said most early-stage biotechs need immediate funding to develop their pipelines, making them less likely to wait indefinitely for the right moment, unlike other industries that are more selective in their timing.
“For a lot of biotechs, it’s important to go public while the window is open instead of waiting for the right valuation,” Kim said. “The window is definitely not closed. Though it is a more challenging market situation.”
Companies in other industries that could price this week include American Farmland Co., a real estate investment trust guided by Goodwin Procter LLP, which is planning an estimated $114 million offering that IPO researcher Renaissance Capital lists as day to day.
Low-power memory chipmaker Adesto Technologies Inc., guided by Fenwick & West LLP, is waiting to complete a $42 million IPO of 6 million shares at $7 each and Sole Elite Corp., a Chinese athletic shoe sole maker advised by Schiff Hardin LLP, is expected to price an estimated $33 million IPO. Both listings are considered day to day.
A revived IPO market will also need more technology offerings. The industry is on pace to produce its lowest share of total IPOs since 2008, according to Renaissance Capital.Orrick Herrington & Sutcliffe LLP partner Christopher Austin said many technology companies are avoiding volatile public markets as long as private financing is ample.
“There are many companies that are starting to think about going public but the private markets have been so welcoming that frankly some of the best companies have decided to wait,” Austin said.
One company that could jumpstart technology’s soft showing is Square Inc., a digital payments company co-founded by Twitter co-CEO Jack Dorsey, which filed plans Wednesday for a $275 million offering, though that number can change once specific terms are announced.
Austin said that a good showing from Square could encourage some of the other “unicorns” — private companies with valuations greater than $1 billion — in Silicon Valley to step forward. That’s assuming volatility eases, as the market’s choppy waters have deterred other companies from proceeding with plans.
Supermarket chain Albertsons delayed pricing an estimated $1.6 billion IPO, citing market volatility, while payment processor First Data Corp., the year’s largest IPO at $2.6 billion, priced below range at $16 and saw shares drop to $15.75 in their debut Thursday. Another hotly anticipated technology IPO, Pure Storage Inc., saw its shares fall 5.8 percent in its Oct. 7 debut.
Renaissance Capital said in a report previewing the fall IPO outlook that the so-called VIX, an index measuring stock volatility, needs to remain “comfortably” below 25 for issuers to have confidence. The closely watched metric eclipsed 40 in August amid the height of Chinese turmoil before falling below 20 again this month.
“If the VIX level comes down there is real potential for companies to get out there,” Austin said, adding that he doesn’t expect an uptick until the first or second quarter of next year.
Year to date, 147 IPOs have priced, down about 37 percent from the year-ago pace, according to Renaissance Capital. At the current rate, this year will become the first since 2012 to produce fewer than 200 IPOs.
–Editing by John Quinn and Kelly Duncan.
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