Many investors have already been on vacation for months — and now it’s break time for the IPO market. After the one IPO scheduled for the week, consider the doors essentially closed until mid-September.
Hi-Crush Partners LP, which is a top provider of sand for hydraulic fracturing (or fracking), is set to go public later this week. The company plans to issue 11.3 million shares at a range of $19 to $21, and lead underwriters include Barclays (NYSE:BCS), Morgan Stanley (NYSE:MS) and Credit Suisse (NYSE:CS).
While there are many frack sand operators, Hi-Crush has an advantage because it focuses on Northern White sand, which has a relatively low cost and high purity. The company operates a 561-acre facility in Wyeville, Wisc., that processes 1.6 million tons per year. The total reserves are expected to last about 33 years, and the facility also is alongside a rail line that allows for easy shipment.
Hi-Crush also has the advantage of various long-term contracts with subsidiaries of companies like Baker Hughes (NYSE:BHI), FTS International, Halliburton (NYSE:HAL) and Weatherford International (NYSE:WFT). Considering the average contract life is 4.6 years, these should provide stability in Hi-Crush’s revenues.
Hi-Crush is structured as a master limited partnership — an asset class that combines the tax advantages of a limited partnership with the liquidity of a publicly traded stock, and often throws off large payouts similar to dividends, called “distributions.” Hi-Crush’s yield is expected to be more than 9%.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.