The chipmaker sold 43.5 million shares at $18 each, below their $22 to $24 price range. Bookrunners on the deal included Citigroup, Deutsche Bank Securities, Barclays Capital, Credit Suisse and JPMorgan. The underwriters have the option to buy another 6.5 million shares.
The lackluster debut contrasts with the IPO a week earlier by the business networking site LinkedIn, which went public at $45 a share and surged 109 percent on its first day. Sister news service Reuters suggested that Freescale’s performance could indicate that investor interest in buyout-backed IPOs may be waning. But LinkedIn is a completely different deal and the first social media company to go public.
A more relevant comparison may be HCA, the biggest buyout-backed IPO ever. HCA, earlier this year, rose a little more than 3 percent on its first day. Of course, HCA was huge, raising $3.8 billion after selling 126.2 million shares at $30.
John Fitzgibbon, founder of IPOscoop.com, said people are terrified of the Freescale deal. A week before its IPO, Goldman Sachs downgraded the semiconductor sector, and institutions are not supporting the Freescale IPO, Fitzgibbon said. “They got the deal out the door at a reduced price and it traded up in aftermarket.”
Is Freescale a win for its sponsors? The firms are taking a 44 percent paper loss on the deal. The
The Austin chipmaker had only $832 million in long-term debt in September 2006 (plus an additional $353 million in other liabilities), according to an earnings statement from that time. Freescale currently has $7.6 billion in debt and capital leases as of April 1, according to the SEC filing. On an adjusted basis, total debt comes to $6.5 billion, according to the filing. Freescale plans to use the $742 million it receives in net proceeds to pay down debt.
Blackstone, TPG, Carlyle or Permira are not selling shares in the IPO. They also, apparently, haven’t taken any dividends. The consortium owned about 205.6 million shares, or 99.89 percent, of Freescale before the IPO. They will dilute their stake to 80.37 percent after the greenshoe. At $18.99 a share, the sponsors’ stake is worth about $3.9 billion, or a little more than half of what they put in. “They’re basically getting 50 cents per dollar invested,” a source says.
Officials for TPG and Blackstone declined comment.
(Luisa Beltran is a senior writer for sister Web site peHub.)