Shares of private equity-backed hospital operator HCA Holdings rose by some 4 percent in early trading in their stock market debut Thursday.
The shares trading were at $31.25 at the open on the New York Stock Exchange. They rose as high as $31.30, above their $30 IPO price.
HCA was taken private in 2006 in a $21 billion deal, excluding debt, that involved Bain, KKR, Bank of America Corp, Citigroup Inc and HCA's founder, healthcare mogul Dr. Thomas F. Frist Jr.
Its IPO is the biggest private equity-backed offering ever in the United States and the latest in a wave of such offerings this year.
HCA Wednesday overcame concerns about its high levels of debt and the uncertain impact of U.S. healthcare reform to sell more shares than anticipated at the high end of the given price range.
The Nashville, Tennessee-based company sold 126.2 million shares for $30.00 each Wednesday, raising $3.79 billion. It had planned to sell 124 million shares for $27 to $30 each.
Underwriters on the IPO were led by Bank of America Merrill Lynch , Citigroup and JPMorgan Chase .
Much is at stake for this IPO, which will set the tone for a slew of similar exits from investments made at the height of the credit bubble in 2005 to 2007.
A newly public HCA could also generate more investor interest in the hospital sector. It may even turn into a major acquirer, possibly drawing it into Community Health Systems' $3.3 billion takeover battle for Tenet Healthcare, according to industry analysts.
Owners include Bain Capital and KKR.
Investors hope that hospital company profits will benefit from an improving economy. Only a handful of U.S. hospitals are publicly traded, and their shares suffered as they cared for rising numbers of uninsured patients in the economic downturn. Paying patient visits were down as more people put off non-emergency visits and elective surgeries.
A U.S. healthcare law extending insurance coverage to some 30 million more Americans could also benefit the group over the long-term.
With the industry now writing off between 15 percent and 20 percent of revenues as bad debt and charity expense, even a modest boost in patients with insurance coverage would help the bottomline for hospital operators, said Jessica Bemer, analyst with Snow Capital Management.
The sheer size of HCA could also make more investors interested in hospitals, Bemer added.
"Adding one that is larger than all of them should bring more attention to the space," she said. Snow Capital Management owns shares of hospital operators Community Health, LifePoint Hospitals and Health Management Associates.
Not everyone is convinced that the health law will prove a cure-all for hospitals. The Affordable Care Act also phases in Medicare payment cuts to hospitals and will make it harder to negotiate reimbursement rates, said Morningstar analyst Michael Waterhouse.
"Our opinion is it's really not worth investors taking that kind of risk," Waterhouse said.
HCA's shares are expected to begin trading on the New York Stock Exchange on Thursday under the symbol "HCA".
HCA has substantial financial risk, too, including more than $26 billion of debt, even after the company uses proceeds from the stock offering to pay off borrowings. HCA's debt exceeds the value of the assets on its books by more than $12 billion.
IPOs on Upswing
But after a series of successful IPOs this year, investors may be willing to ignore those potential wrinkles.
"Investors are looking past healthcare, looking past some of the risks that come with this company and it will maybe ride the momentum generated by recent deals," said Bill Buhr, IPO strategist at Morningstar.
Over the past few weeks, consumer measurement company Nielsen Holdings raised $1.6 billion, Florida-based BankUnited raised $783 million and pipeline company Kinder Morgan raised $2.9 billion.
Toys R Us has filed with U.S. regulators to raise up to $800 million, and Freescale Semiconductor has filed to raise up to $1.15 billion, though neither company has set terms or picked a debut date.
If HCA, which involves more risks than Nielsen and Kinder Morgan , prices its IPO at the top of the range, many more IPOs from private equity firms will likely follow, Buhr said, highlighting Toys R Us as an example.
"The market is clearly enamored for these types of deals and the window could not be more open than now."
HCA was taken private in November 2006 in a $21 billion deal excluding debt that involved Bain, KKR, Bank of America, Citigroup and HCA's founder, healthcare mogul Dr. Thomas F. Frist Jr.
Underwriters on the offering are led by Bank of America Merrill Lynch, Citi and JPMorgan Chase.
--Kate Kelly contributed to this report.