May 19, 2020
US IPOs: Who's Next?
An IPO is a company’s debut into public trading. “Going public” is the pinnacle to which most entrepreneurs aspire when launching their businesses. With the summer abuzz with rumors of companies of the brink of public trading, investors are salivating to know who will be next. Business Review USA asks Kathleen Shelton Smith, Principal of Renaissance Capital and IPO expert, to project the next five companies to go public. The following are Smith’s top picks:
1. GENERAL MOTORS (GM)
In an effort to turn its business around, General Motors Vice Chairman Bob Lutz told Forbes a 2010 IPO was a possibility, but only after a laundry list of criteria were checked off, including turning a profit, generating solid cash flow and having a compelling story to tell investors.
“GM is expected to be a $20 billion IPO, which could be the largest US IPO ever,” said Smith. “The one that will file within the next month will be GM at least from what we hear.”
With November's midterm elections looming, being able to say GM was taken in and out of bankruptcy and back to the public market in just over a year would be a feather in the Obama Administration’s cap.
2. HOSPITAL CORPORATION OF AMERICA (HCA)
HCA, the largest private hospital operator in the US, filed with the SEC to raise up to $4.6 billion in an initial public offering, which has the potential to rank among the 15 largest deals ever on a US exchange. The Nashville, TN-based company booked $30.2 billion in sales over the last 12 months, and plans to use primary proceeds to pay down debt.
“There are certain companies that can raise financing through debt issuance,” said Smith, “but a lot of growth companies can’t. And so this is pretty much the avenue that they have to take.”
Toys"R"Us, the leading global retailer of toys with 1,363 stores in 34 countries, filed with the SEC to raise up to $800 million in an initial public offering. Toys"R"Us has worked to streamline its business, grow its online functionalities and integrate its Toys"R"Us and Babies"R"Us stores into a co-branded format. Investors have long anticipated the announcement by the global toy retailer, which booked net earnings of $304 million on $13.6 billion in sales for the 12 months ended January 30th, 2010. Toys"R"Us plans to list on the NYSE under the symbol TOYS.
“A lot of companies don’t have a choice, they need to come public. So there’s a lot of competition and a lot of really strong companies that are in the pipeline,” Smith said. “They need to be strong and profitable to really get out successfully in the IPO market knowing there are so many really good companies wanting to get out and offer attractive prices.”
4. SMART TECHNOLOGIES
“SMART Technologies filed recently,” Smith reported. “I would put that on my list.” SMART Technologies, which designs interactive technology products including its SMART Board for the education sector, announced terms for its IPO. The Canada-based company plans to raise $600 million by offering 35.3 million shares at a price range of $16-$18 with 26.5 million shares to be sold by insiders including private equity firm Apax Partners and Intel Corporation.
“We’re looking for [companies] that are large IPOs, that are profitable companies,” said Smith on how to determine which companies will go public. “Is it small? Is it profitable? Does it have a growth story? Then we’ll look at one we’ve been hearing a lot about.”
5. LIBERTY MUTUAL AGENCY CORPORATION
Liberty Mutual Agency Corporation, the tenth largest US writer of property and casualty insurance and a subsidiary of Liberty Mutual Group, filed with the SEC to raise up to $100 million in an initial public offering. The Boston, MA-based company, founded in 1912, booked $10.9 billion in sales last year. Liberty Mutual Agency Corporation plans to list on the NYSE under the symbol LMA.
“Companies that are going public now should go public because they need capital for growth or they really need to begin to provide liquidity for their investors, who are basically being pressured to show returns to their limited partners,” said Smith. “There’s pressure in companies to go public from their financial sponsors and also for those who are looking for growth capital.”