The meager IPO market has been tough for the private equity crowd. After all, this is a key way for them to make big returns for their investors.
But Thursday, a private-equity-backed firm -- Verso Paper (NYSE: VRS) – hit the public markets. The company priced 14 million shares at $12 each. Unfortunately, by the end of the trading day, the stock was at $10. The company originally wanted to issue 18.8 million shares at a price range of $16-$18.
Verso's private equity sponsor is Apollo Global Management LLC, which bought the company back in 2006.
The company is a major supplier of coated papers for catalog and magazine publishers. Some of the customers include Condé Nast Publications, National Geographic Society, Avon Products and Sears Holdings
However, with high energy prices and pesky inflation, Verso's industry has come under much pressure. As a result, there have been a variety of mill closings from the competition, which should ultimately help the survivors. What's more, Verso has built a low-cost structure.
But as seen with Verso's stock performance Thursday, it's not a story Wall Street is interested in right now.
Everyone is talking about solar. Whether you believe that solar energy will somehow displace an oil-driven economy or not (I don't), some of these stocks like First Solar (NASDAQ: FSLR) and JA Solar (NASDAQ: JASO) have seen big gains over the past few years.
The success of solar companies has not been lost on ETF firms with their constant new products hitting the market. A smaller ETF firm called Claymore Securities looks to be first to the market with a solar ETF, the Claymore/MAC Global Solar Energy Index ETF, with an aptly-named ticker, (NYSE: TAN).
Safety-Kleen got its start in 1963 as a parts washer for auto repair. However, by the late 1990s, Laidlaw bought the company and added waste disposal assets (such as for landfills). Unfortunately, a few years later, the company was mired in an SEC investigation and bankruptcy.
But after a painful restructuring, Safety-Kleen is back on track. In fact, the company has filed for a public offering.
As of now, Safety-Kleen is the largest collector, recycler and re-refiner of used oil. The company also is a provider of environmental solutions (such as containerized waste services). There are more than 200 facilities across the US, Canada and Mexico.
Customers include 420 of the Fortune 500 and more than 300,000 small-to-medium sized companies. In fact, this is a user base that tends to have recurring requirements, making for a nice revenue stream. So last year, Safety-Kleen posted $1 billion in revenues and $116.6 million in adjusted EBITDA.
Safety-Kleen has market power and a dominant brand (there is a key deal with NASCAR). And with extensive regulations, the company should continue to grow.
We are investing in optimistic times. News -- good or bad -- seems to magically morph into an opportunity to move markets higher. In the past week, even more than usual, weak economic news was accompanied by commentary along the lines of, "it could have been worse," and other euphoric sentiments.
It is difficult to determine whether this is another short-covering bear market bounce or a real rally. But next week will bring us new information that will start to indicate where the answer lies. For now, investors are looking at the glass as half-full. Cash on the sidelines is moving in to equities, partly because there are very few other alternatives. Yields are low, commodities are risky and real estate is taboo.
Next week begins with the celebration of Cinco de Mayo, yet the markets were way ahead -- it has shifted into party mode on its own during the past few weeks. Here is a summary of key events to watch during the week ahead:
Monday, May 5
First off, the market gets a chance to react to news of Microsoft withdrawing its bid for Yahoo. It will be interesting to see how far Yahoo's stock price sinks as well as what all the market watchers think Yahoo (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) will do next.
Hewitt Associates (NYSE: HEW) the HR firm that has been showing amazing strength is set to report. First Call is looking for quarterly earnings of $.38 as compared to a year ago of $.23. There may be opportunity for this firm as we go into harder economic times where companies are looking for an easy solution to labor concerns.
Also reporting is Nam Tai Electronics (NYSE: NTE). It could have a good quarter since the need for computer parts is on the rise. Intel and Apple did well to show that international demand is still hot for electronics and this is one of the parts manufacturers. Through its electronics manufacturing services operations, Nam Tai makes electronic components and sub-assemblies, including liquid crystal display (LCD) panels, LCD modules, flexible printed circuit sub-assemblies and image sensors modules and printed circuit board assembly for Bluetooth headsets. First Call estimates are for $.19 as compared to year ago of $.19 per share on $163 million of revenue.
In the US, about $1.31 trillion is spent on transportation and logistics (according to the Council of Supply Chain Management Professionals). Yet, about 30% of transportation capacity is unused because of inefficiencies.
Well, this is what Echo Global Logistics helps to solve. Moreover, this week the company filed for an IPO.
Echo has developed a platform that processes data on a network of more than 16,000 transportation providers. Through sophisticated optimization, the company can offer its clients cost savings that range from 5% to 15% (which is a big deal in the transportation industry).
So far, Echo has more than 4,600 clients. And the growth ramp has been stunning, increasing revenues from $7.3 million in 2005 to $95.5 million in 2007. Echo posted net income of $1.7 million last year.
With the IPO money, Echo will be in a strong position to strike M&A deals. Keep in mind that the logistics sector is highly fragmented. According to the Transportation Intermediaries Association, no third-party logistics provider controls more than 5% of the US market.
What's more, the growth of outsourced logistics services should continue to grow. About 17% of logistics expenditures, in the US, are outsourced (this is according to a study from Armstrong & Associates).
The lead underwriters on the Echo IPO include Lehman Brothers (NYSE: LEH) and Citi (NYSE: C). You can also locate the prospectus at the SEC website.
Back in 2000, Rackspace attempted an IPO. Of course, the dot-com implosion derailed those plans.
Well, now the company is back and its IPO prospects look much better.
Rackspace is a giant in the web hosting industry. While the company has a solid infrastructure, it also has an extreme focus on customer service. In fact, the company terms it "Fanatical Support" (which is trademarked).
By the end of 2007, Rackspace had more than 29,000 customers. Actually, over the past five years, revenues have soared from $56.6 million to $362 million,a 59% annual growth rate. The company also posted a $17.8 million profit last year.
What's more, the prospects for the global hosting market look bright. According to Tier1Research, the market is expected to grow 26% per year to $24.4 billion by 2010.
Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.
Last month, Stephen Schwarzman's Blackstone fund announced that its fourth-quarter earnings for 2007 had plunged a precipitous 89%. What was particularly galling was that this occurred in the same year that the fund released its IPO, for which it received top dollar. Of course, by the time this was announced, Schwarzman had already collected a $5.1 billion paycheck for 2007.
There has been some talk about how Blackstone's declining profits had led to a comparable decline in Schwarzman's fortunes. However, given his considerable 2007 salary, it doesn't seem like he's hurting all that much. In fact, he recently donated $100 million to the New York Public Library; while this is a very impressive gift, it comes with an equally impressive price: the main library building at 42nd Street and Fifth Avenue will now be named the Stephen Schwarzman Building. In return for his munificence, Schwarzman's name will be carved in five separate places on the white marble edifice: thrice on the front of the building and twice on the 42nd Street side. While this will, no doubt, be far more attractive than a graffiti "tag," one cannot escape the feeling that the concept is the same.
One Blackstone investor has recently sued the fund, claiming that, in its IPO documents, it failed to disclose key information about the unimpressive performance of some of its companies. Had this information been made available to investors, they presumably would have had lower expectations for Blackstone and would have paid considerably less for shares in it. In addition to being unethical, the suit avers that this is a violation of federal securities laws.
Except for a few deals -- such as the Visa (NYSE: V) public offering -- the IPO market has been fairly quiet. But, there are some companies that think things will warm up.
Take SolarWinds, which has recently filed for an offering. The company develops enterprise-class network management software. What's more, the technology is easy to use (which is a rarity in the space).
As of last year, SolarWinds had more than 50,000 customers, which range from small businesses to Fortune 500 biggies.
A key to SolarWinds success is its focused marketing, which heavily leverages online marketing. There is also a direct sales force that knows how to close leads.
So far, the results have been stunning. From 2005 to 2007, revenues have gone from $27.9 million to $61.7 million. What's more, operating income is about $30.9 million.
And there is much room for growth. According to a research report from Gartner, the network management sector is expected to grow from $4.95 billion in 2008 to $5.66 billion by 2011.
BlackRock (NYSE: BLK), which is a top global asset manager, is one of the few that has been relatively unscathed in the financial meltdown. The company avoided such things as subprime securities and was quite conservative with client portfolios.
As a result, BlackRock now has lots of flexibility. So, what to do? Well, the firm has put together an IPO filing for a fund of hedge funds (to raise about $500 million). The offering will be on the London Stock Exchange.
Basically, a fund of hedge funds is a platform where managers invest in various hedge funds. True, the fees can be high, but there are some key advantages, such as diversification and improved due diligence. Besides, BlackRock has proved to be a top-notch operator with understanding complex investments. After all, the firm is helping to deal with the management of a big part of the Bear Stearns (NYSE: BSC) portfolio.
Actually, BlackRock's fund of hedge funds is part of Quellos Group LLC, which the firm purchased last year. In other words, it looks like BlackRock may snag a nice return on this deal.
Herb Greenberg has an excellent column (subscription required) in this weekend's Wall Street Journal, raising questions about the euphoria investors are feeling over the IPO of Visa Inc. (NYSE: V). First, Visa's disclosure of risk factors includes more than 8 pages of legal and regulatory risks -- much of it is boilerplate but that's a lot of legal issues.
Other risk factors facing Visa include heavily reliance on a few customers and, gasp, a slowing in the growth-rate of transaction volume.
I certainly don't claim to be an expert on the Visa IPO, but I'd be wary of diving in here for a few other reasons. The Visa IPO was, in part, inspired by the tremendous success of MasterCard's (NYSE: MA) 2006 IPO, which is up more than 300%. Here's the thing: the success of that IPO should have nothing to do with whether you buy or don't buy shares of Visa. That's past, and it's completely irrelevant. But I think that a lot of people are buying the Visa IPO because they "missed out" on the MasterCard run-up, and that's a recipe for disaster. MasterCard's strong performance over the past year and half is no way a harbinger of great things to come for Visa shareholders.
In addition, I have the same skepticism of the deal that I have with any IPO. Visa was not in desperate need of the $17.3 billion it raised and presumably went public now because they felt that they would be able to sell shares at a strong valuation. Buying shares right after the IPO is like buying clothing off the rack at Nordstrom's: You ain't gonna get any bargains.
This post is one of several on business heirs apparent. Let us know in the comments whether you think Allegra Versace should take up the reigns of Versace, and be sure to check out the other heir apparent posts.
Allegra Versace was eleven years old when her uncle Gianni was murdered at his Florida villa. The fashion industry icon and founder of the Versace empire left half of his fortune to Allegra, with whom he had been especially close. "My children were his children," said Allegra's mother, Donatella Versace. "He was always with Allegra. Since she was nine years old she would go to museums with him. ... She would sit with him and go through art books. ... It was adorable. She was such an amazing, special little girl."
On her 18th birthday, Gianni's "little princess" came into her inheritance, worth $700 million and including real estate holdings worldwide. Donatella had protected Allegra from the media, but even all grown up Allegra has had little to say publicly about how she felt about the loss of her beloved uncle or about what she planned to do with the family firm. The Versace Group made it clear, however, that Donatella and Allegra Versace would bring a new face to the Versace label, which had struggled since the loss of its founder.
It's going to be a historic week. First, we experienced the meltdown of a mega financial institution, Bear Stearns & Cos. (NYSE: BSC). Second, Visa was able to raise a stunning $17.9 billion for its IPO with the share price coming to $44, above the $37-42 range.
True, it helped that the Fed came to the rescue (with creative approaches to apply liquidity) and that the Dow surged 420 points Tuesday, the day of the IPO. There were also earnings optimism from Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH).
Even without these, though, Visa would have performed well. Simply put, it's a tremendous company.
It operates the world's largest payments processing system – leading in terms of transaction volume, payment volume and cards issued.
Recently, I've been getting too many emails and comments on my blog asking what I think of the Visa (NYSE: V) IPO. Listen, every single long-term investor should be interested in it. Until today, it's been one of the few remaining marquee companies around unavailable to our stock-obsessed society and aside from litigation risk, the company's got everything going for it.
It's got strong sales and transaction growth and more importantly, like rival MasterCard (NYSE: MA), it's immune to the current credit crunch, passing off cardholder debts to the banks. So, when others are sweating potentially catastrophic events like The Bear Stearns Companies Inc. (NYSE: BSC) and the potential collapse of other brokers like Lehman Brothers Holdings (NYSE: LEH), scaring everyone half to death, these guys are sitting pretty. This is also the main reason why MasterCard's stock has handily outperformed rivals American Express (NYSE: AXP) and Discover Financial Services (NYSE: DFS), two companies -- and stocks -- that are certainly feeling that credit pain.
There'll be plenty of other articles dissecting the company, but I find that in rare situations like these, it's best to think in terms of the general picture. Not because it's the right way to invest, but because it's the way most people do. And those most people are the ones who can really influence the stock price here.
The meager IPO market has been tough for the private equity crowd. After all, this is a key way for them to make big returns for their investors.
Everyone is talking about solar. Whether you believe that solar energy will somehow displace an oil-driven economy or not (I don't), some of these stocks like 
We are investing in optimistic times. News -- good or bad -- seems to magically morph into an opportunity to move markets higher. In the past week, even more than usual, weak economic news was accompanied by commentary along the lines of, "it could have been worse," and other 
In the US, about $1.31 trillion is spent on transportation and logistics (according to the Council of Supply Chain Management Professionals). Yet, about 30% of transportation capacity is unused because of inefficiencies. 
Back in 2000, 
Except for a few deals -- such as the 
and 
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Herb Greenberg has an 
Allegra Versace was eleven years old
It's going to be a historic week. First, we experienced the meltdown of a mega financial institution, 
Citigroup
Comfort Zone Investing: One thriving area of real estate: Apartments
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
