Grand Canyon Education Inc. broke the initial public offering draught on Thursday when it priced 10.5 million shares at $12 per share, and began trading on the Nasdaq Global Market on Thursday. The deal marks the first IPO issued in the United States since Aug. 8, when Rackspace Hosting Inc. announced its offering, according to investment bank Renaissance Capital, which maintains the IPO Home website. The Rackspace deal “broke the longest IPO drought since the 1970s,” reported Renaissance.
Not surprising, this was at the lower end of its estimated price range. In fact, the price is 29 percent below the midpoint of the original $16 to $18 range, said Renaissance. Further, the company twice had lowered its hoped-for price, reported Reuters. Credit Suisse and Merrill Lynch were the joint book-running managers.
Nevertheless, the on-line university operator was able to raise about $126 million from the offering. “The falling price estimate range was a tell-tale sign of low demand for Grand Canyon’s IPO,” Scott Sweet, a senior managing director with advisory firm IPO Boutique, told Reuters.
On one level, it is surprising it received any interest, given that about 75 percent of the offering’s proceeds will be used to pay existing stockholders a special distribution, according to a regulatory filing. On the other hand, in the nine months ended on Sept. 30, the company reported operating income of $9 million on $109.6 million in revenues.
Rackspace Hosting Inc., which went public at $10, is currently trading below $6. Since then 29 companies have canceled or postponed their offerings, according to Reuters.
On Wednesday alone, business software maker Metastorm Inc. filed to withdraw its $86 million stock offering, noted the Baltimore Business Journal.. Yet three other companies have filed to go public this month, according to Hoover’s Inc. Included in that deal trio is Alon Brands, a petroleum distributor and subsidiary of Alon USA Energy, which hopes to raise $100 million; natural gas producer Trident Resources, which is seeking $460 million, and Compressco Partners, which specializes in providing services to more than 400 natural gas and oil companies ($55 million).
So far, during the third quarter, a total of five companies issued IPOs for an aggregate $900 million, with the average deal raising $183 million, reports Hoovers. During the second quarter, 13 IPOs were issued for a total of $4.2 billion, with the average deal raising $321.5 million.