Start the conversation
On the upcoming IPO calendar in May 2013 are three companies representing how a sector's recovery can create new profit winners.
Typically investors don't trust any company in a distressed sector, even if that company's fundamentals are strong. This makes it extremely difficult for companies in that sector to raise capital, recover, and grow.
For several years now this has been the case with industries and companies tied to the residential real estate market.
Housing prices have been in a virtual free fall since late 2007. Very few analysts feel comfortable declaring a market bottom.
This has made it almost impossible – until recently – for homebuilders to raise additional capital through IPOs.
The weak market also disrupted banks and financial institutions that fund homebuilding and buying.
But things are finally changing.
Large institutional investors are becoming more comfortable with the housing market and we see that the IPO calendar has two banks and a homebuilder coming to the marketplace in the next week.
This could be very good news for IPO investors as the first deals in the space tend to be among the best performing as a sector recovers and comes back into favor on Wall Street. Those who are coming to the market first could be market leaders as the rally gains momentum.
More good news for investors is that the recovery in the housing and banking markets is just starting to take hold. As faith continues to build in these industries, we will see more IPOs of related companies.
IPO Calendar 2013: NBCB, TSC, WLH
On Friday we will see two banks make their trading debuts.
First NBC Bank (Nasdaq: NBCB) is a New Orleans-based bank with 31 branches and $2.7 billion in assets. The bank serves the New Orleans and Mississippi Gulf Coast markets. Management believes there is a strong market for financial institutions based in their marketplace with local decision making ability to serve the small to mid-size business and high net worth individual marketplace.
Since its founding in 2006, the bank has done five acquisitions of smaller local banks including one FDIC assisted transaction on very favorable terms. First NBC Bank is now the largest bank holding company in the New Orleans market.
The bank is offering 4.2 million shares between $22 and $26 per share. The offering is being managed by Sandler O'Neil and Keefe, Bruyette & Woods.
Friday will also see the IPO of Tristate Capital Holdings Inc. (Nasdaq: TSC), a bank holding company based in Pittsburgh, PA. The bank has $2.1 billion of assets all obtained though organic growth. The bank was also formed to serve the middle market business and high net worth individuals.
Management believes that they can achieve significant growth and operating performance by adapting their products and services to fit this niche market – more growth than could be achieved in a traditional bank branch network. They use a branchless model where all operating activities such as underwriting, credit administration and deposit operations are handled at the headquarters office and representative offices are used for marketing and sales purposes. They also provide loan products to high net worth individual using a network of broker dealers, wealth managers, family offices and trust companies.
The bank is also looking to acquire or invest in a wealth management company to better serve that segment of the market.
Stephens and Keefe, Bruyette & Woods are managing the offering and will sell 5.7 million shares between $10.50 and $12.50 per share.
On Thursday, May 16 we will see a California-based homebuilder make its debut offering.
William Lyon Homes (NYSE: WLH) is one of the largest homebuilders in the Western United Sates and has operation in California, Arizona, Colorado and Nevada. In the markets where it operates, the company is one of the leading builders in terms of market share.
It is well positioned to benefit from a sustained housing recovery with a substantial inventory of more than 13,000 building lots. The company is gaining momentum as the housing recovery takes hold with five consecutive quarterly increases in new orders, closing and backlog of homes. The company also reported that increased demand has caused a substantial increase in the average selling price of its homes under contract.
As the housing recovery gains strength, William Lyon should see strong revenue and profit growth. The co-managers of the offering are Credit Suisse, JPMorgan and Citigroup. The company will offer 8.7 million shares between $22 and $24 per share.
For more on this year's biggest new offers: 2013 IPO Calendar: Who to Watch