Soccer, Steak and Madoff in Busy IPO Week
CNBC Markets Producer
From the world-famous soccer club, to the biggest U.S. steakhouse, to the firm with the Madoff connection — this week’s initial public offerings calendar is jam-packed with action.
With six deals on tap, this is shaping up to be the busiest week in the IPO market since Facebook’s tumultuous debut in May.
No doubt, a great deal of attention will be on Manchester United, the UK-based soccer club and one of the most well-known sports brands in the world.
Founded in 1878, Manchester United plans to raise $300 million by offering 16.7 million shares at a price range of $16 to $20. At the midpoint of the targeted range, the club would command a market value of about $3 billion.
With high valuation relative to expected future earnings and sales, Manchester United is unlikely to find many fans on Wall Street, say analysts.
“This is a very high number for an organization with roughly $500 million in annual sales that has limited growth opportunities, and that does not have a high profit margin,” says Jay Ritter, a University of Florida finance professor.
“A high valuation can be justified by a rich person who is willing to overpay for the prestige of owning Manchester United. But as a financial investment, I think that the price is so high that public market investors can expect a low return,” adds Ritter.
Ritter doesn’t expect the offering to price well or have a big pop when the stock starts trading Friday.
Scott Rosner, a sports business professor at the Wharton Business School, agrees that investors will likely be attracted to the stock for emotional reasons rather than financial ones.
Rosner points out that other sports IPOs have not done very well. The STOXX Europe Football Index, which covers football clubs listed on an exchange across the pond, is down 23 percent in the last year.
Investors will also be keeping an eye on Bloomin' Brands, an owner of five restaurant chains, including the number one steak restaurant by market share in the U.S. — Outback Steakhouse. The Tampa, FL-based company plans to raise $300 million by offering 21.4 million shares at a price range of $13 to $15.
According to president of IPO Desktop Francis Gaskins, this deal is priced to sell.
In 2011, Bloomin' Brands recorded $3.8 billion of revenue and $100 million of net income, according to its SEC filing. The company lists Bain Capital and Catterton Management Company as its sponsors, which own 66 percent and 14 percent of pre-IPO shares respectively.
Another offering from the restaurant industry will come from CKE, a fast food chain with more than 3,000 restaurants under its primary brands Carl's Jr. and Hardee's. The Carpinteria, CA-based company hopes to raise $200 million by offering 13.3 million shares at a price range of $14 to $16.
Gaskins says CKE looks overpriced relative to its competitors like Wendy’s , especially because the company is struggling to generate profits.
CKE’s revenue fell 3.9 percent to $1.28 billion in fiscal 2012, and the company had a net loss of $19.3 million, according to the SEC filing.
Also on tap this week is an offering from maker of radio frequency chips Peregrine Semiconductor. The company plans to raise $83 million by offering 5.5 million shares at a price range of $14 to $16.
According to Gaskins, Peregrine’s gross margins are too low for the tech company to excite investors.
Performant Financial is expected to begin trading Friday at a price range of $12 to $14. Founded in 1976, the company helps to recover delinquent and defaulted student loans and Medicare payments.
The company generated 74 percent of its revenues from just five clients for the year ended December 31, 2011. Performant Financial warns that many of its contracts are not exclusive and that it expects some contract renewals to be competitive.
Lastly, there’s an offering from Stemline Therapeutics, a biopharmaceutical company developing treatments that target cancer stem cells and tumor bulk. The company, which is yet to generate any revenue, plans to raise $42 million by offering 3.5 million shares at a price range of $11 to $13.
An interesting side-note, Stemline Therapeutics lists the Madoff Family LLC (yes, as in Bernie Madoff) among its pre-IPO shareholders, with a roughly 15-percent stake.
All in all, this has been a mixed year for the IPO market.
At 86 deals, the number of offerings is down 7.5 percent from last year, according to data from Renaissance Capital. The number of withdrawn deals is up — 39 versus 37 a year ago.
The pricing environment has been challenging as well, with most deals pricing at or below their offer range.
On the positive side, the returns are far better than last year. The average IPO has returned 14.4 percent from its offer price versus an average loss of 10 percent last year, according to Renaissance Capital.
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