Arizona’s market for new public companies showed signs of life earlier this year with two companies poised to offer stock for the first time.
But the market for public offerings lost momentum as the overall stock market veered down a volatile path and at least one of those companies put the brakes on its plan.
Since the recession hit, investors have been wary of investing in companies offering stock through initial public offerings, or IPOs, that would allow their shares to trade publicly.
“Companies are having to concede to the buyers more and more,” said Matt Therian, an analyst for Renaissance Capital, a nonprofit research firm based in Greenwich, Conn. “IPOs are risky assets, and when the economy gets weak there is less demand for risky assets.”
Nationwide, there have been 172 IPO filings as of August, up 330 percent from August 2009, according to Renaissance Capital. Of those, 87 have been priced, or completed the process.
In Arizona, the roughly 50 public companies include US Airways, the P.F. Chang’s restaurant chain, Taser International and Freeport McMoran, a copper producer. Swift Transportation Co. and DriveTime Automotive Group, a trucking company and a used car retailer, were promising candidates to join them, but so far this year the state has not ushered in a new public company.
The last successful IPO in this state was in 2008, when Grand Canyon University, a for-profit Christian school in Phoenix, went public with a $230 million offering. The university wanted to pay back original shareholders’ loans, to pay off bills and to expand, according to its Securities and Exchange Commission filing. Shares are trading on the NASDAQ under the ticker LOPE.
DriveTime, a Phoenix-based used car dealership that caters to borrowers with credit problems, moved toward a $200 million IPO in February, then recently abandoned the effort. The company has 83 locations in 13 states.
Instead, DriveTime turned to a bond sale to raise money to offset its more than $1 billion in debt, said Jon Ehlinger, a spokesman for DriveTime. The company sold $163 million of secured notes in the private placement market, which is exempt from registration with the SEC because it does not involve a public offering.
“Ultimately, right now we’ve decided not to go public,” Ehlinger said. “We decided that the market seemed to be favorable on the bond side so we took advantage of the opportunity.”
Ehlinger said the company’s IPO plans are only on pause, and DriveTime may revive the process if the IPO market improves.
Swift Transportation may be the only company to go public this year, if it completes the pricing. The largest truckload carrier in the U.S. first became a public company in 1990 but it went private in 2007. It filed for a $700 million IPO on July 22, according to Renaissance Capital.
The company has yet to announce a timeline or pricing terms and Trent Broberg, director of marketing at Swift Transportation, declined to comment.
While there are plenty of companies poised to raise money with stock offerings, demand for new investments has been weak, said Christopher Lamoureux, professor of finance at University of Arizona’s Eller College of Management.
“IPOs have really seemed to dry up,” Lamoureux said. “We have seen a bit of a rebound, but the stock market continues to bounce around. I don’t think that’s inducing a lot of companies to feel it’s a good time to go public.”
Global Water Resources is one local company that felt the brunt of the weak investor interest. The Phoenix-based company, which owns 14 water and wastewater utilities in Arizona, tried for two years to become a public company. It abandoned the plan in June, citing poor market conditions. Company officials didn’t return calls for comment.
Another Arizona company, LifeLock, a Tempe-based an identity theft prevention company, was expected to go public this year, but Mike Prusinski, vice president of corporate communications, said LifeLock is remaining private for now.
“Right now we have no plans for an IPO, though there are plenty of rumors going around,” Prusinski said in an e-mail. “We’re flattered by the speculation, but we’re just moving forward with daily business at this point.”
• Renaissance Capital: www.renaissancecapital.com
• Securities and Exchange Commission: www.sec.gov
What are IPOs?
• Initial public offerings, or IPOs, are when companies offer stock on a public exchange. Small companies offer stock to raise money to expand. Larger private companies may offer stock to become publicly traded.
• A pricing is when the company, with the help of an underwriter, determines the amount of money that the shares will be sold for and offers it at that price.
• The total amount of an IPO is the total amount the company expects to raise by selling all its shares.
• Investors, or buyers, purchase the shares. When more investors are interested in new companies’ shares, the market for IPOs is stronger.
• The last IPO in Arizona was in 2008, when Grand Canyon University, a Phoenix-based Christian school, went public.