Subscribe to Money Morning get daily headlines subscribe now! Money Morning Private Briefing today's private briefing Access Your Profit Alerts

Synchrony IPO Price Set Today; Here's What to Watch for as SYF Stock Hits Market

The Synchrony IPO price was set at $23 per share today (Wednesday), meaning the company raised $2.88 billion in its initial public offering.

Synchrony IPO priceShares were priced at the low end of the previously proposed range of $23 to $26 per share. Synchrony Financial (NYSE: SYF) had been expected to raise $3.1 billion.

At that price, Synchrony has a valuation of $19.2 billion.

While the IPO price was a disappointment for many, Synchrony still outpaced the second largest IPO of 2014, Ally Financial Inc. (NYSE: ALLY), which raised $2.6 billion in April.

Synchrony Financial is a spin-off of General Electric Co. (NYSE: GE) and is GE's consumer-finance arm. The company generates 69% of its revenue from its retail credit card segment, which counts Inc. (NYSE: AMZN), Wal-Mart Stores Inc. (NYSE: WMT), and The Gap Inc. (NYSE: GPS) as its largest partners.

In the Synchrony IPO filing, the company reported 2013 net interest income of $10.57 billion, which was an 11% increase from the previous year. The income spike was attributed to higher credit card spending and a decline in net charge-offs. A net charge-off, or "bad debt," is a loan that the company can't collect on.

While income was on the rise in 2013, profits were down. Synchrony reported profit of $2 billion, which was a 6.6% drop from the previous year. The company cited increased costs and a boost to its fund used to cover bad loans as reasons for down profit.

SYF stock will begin trading on the New York Stock Exchange tomorrow morning.

The lead underwriters on the deal include Bank of America Merrill Lynch, Barclays PLC (NYSE: BCS), Credit Suisse Group AG (NYSE: CS), Deutsche Bank AG (NYSE: DB), Goldman Sachs (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM), and Morgan Stanley (NYSE: MS).

The Synchrony Financial IPO takes place during the hottest year for IPOs since the Dot-Com era. According to Renaissance Capital, 168 IPOs have come to market in 2014, the highest number since 2000. Those 168 companies have averaged a first-day gain of 14%, and an overall return of 11.3% from their offer prices.

So a first-day gain for SYF tomorrow would fall in line with the overall IPO market of 2014, but potential investors will be looking past the IPO market when it comes to SYF stock's value…

Join the conversation. Click here to jump to comments…

Leave a Reply

Your email address will not be published. Required fields are marked *

Some HTML is OK