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Thursday Gets Downright Ugly for IPOs

Three deals hit the wall at pricing time


Going into this week, the environment looked pretty good for IPOs, and NYC grocer Fairway‘s (NASDAQ:FWM) hot IPO — which ripped off 33% returns Wednesday — gave us no reasons to think differently.

But things got ugly today as three deals all priced below their ranges, with two falling more past that:

Company Ticker Range Offering Price Return*
Hannon Armstrong HASI $14-$16 $12.50 -9.7%
Taminco TAM $18-$20 $15 -5%
Intelsat I $21-$25 $18 +3.4%
* Thursday midday returns

Still, bear moves sometimes can present intriguing opportunities. In today’s case, all three IPOs seem to be high-quality companies, so let’s take a closer look at each.


Taminco (NYSE:TAM) is a specialty chemical company that produces alkylamines and alkylamine derivatives, which are used to help with the protection of crops, water treatment and even compounds for shampoos.

“Our products have a wide array of applications,” said CEO Laurent Lenoir, to whom I talked this morning.

Lenoir pointed out that, unlike other companies in his space, Taminco is noncyclical. The company focuses on markets that involve nondiscretionary expending, and many of its products have no substitutes. This gives Taminco pricing power, and is a big reason why it can maintain EBITDA margins above 20%.

Lenoir’s also upbeat about Taminco’s growth prospects.

“We will continue to get exposure to the U.S. markets; it’s a region that is very strategic to us. And the IPO will help with this.”

Hannon Armstrong

Hannon Armstrong (NYSE:HAMI) provides financing for infrastructure projects, such as for universities, governments and power utilities. It also has a business focus on sustainability, so projects must be either neutral or negative on carbon emissions. Clients include blue-chip names like Chevron (NYSE:CVX), Honeywell (NYSE:HON) and United Technologies (NYSE:UTX).

CEO Jeff Eckel told me that Hannon is a unique way to get exposure to the infrastructure asset class — investments that usually are for institutions, not retail investors.

“We used the REIT structure since it was the cleanest option,” he said, referring to the fact that there’s no need to deal with a K-1 (as would be the case with a master limited partnership) and there’s no taxes at the corporate level.

Eckel did not get specific about the dividend, but said it would remain a priority.

“We are going to pay an attractive, risk-adjusted dividend. Our assets are strong.”


Intelsat (NYSE:I) is the world’s largest provider of satellite services to businesses, boasting a fleet of more than 50 geosynchronous satellites that cover more than 99% of the world’s populated regions.

Growth has been an issue, as illustrated by just a marginal year-over-year improvement in revenues to $2.61 billion, though its margins are huge — last year, adjusted EBIDTA came to a mouth-watering $1.186 billion.

More importantly, the company has a backlog of $10.7 billion, which means Intelsat should have little trouble maintaining strong cash flows.


Of course, we shouldn’t ignore Fairway just because it’s been on the winning side of the ledger this week.

Founded in the 1930s, Fairway now operates 13 grocery stores in the New York City metropolitan area with a focus on natural and organic foods at reasonable prices.

But its valuation doesn’t keep up with that mission — shares trade at about 21 times adjusted EBITDA, which compares to about 13x for both Whole Foods (NASDAQ:WFM) and The Fresh Market (NASDAQ:TFM).

Granted, investors are paying a premium for previous growth — from 2010 to 2012, Fairway improved revenues by 37% to $554.9 million. However, the company only expects to add two more stores in fiscal 2014; investors might be anticipating too much growth as of right now, and as a result, the stock could be vulnerable.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities, and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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