While it does not mention International Shipping Enterprises, today's New York Times has an interesting article on the recent spate of shipping company IPOs.
This I.P.O. Trend Has Nary a Dot Nor a Com
By IRA BRESKIN
Published: August 7, 2005
THE fashion in initial stock offerings this summer is about as retro as you can get: shipping companies, the kind with vessels that carry cargo across the waves.
About a dozen such companies have initial offerings in the Wall Street pipeline - and eight shipping I.P.O.'s, valued at almost $1.6 billion, have already gone to market this year, said Craig Fuehrer, head of the global shipping investment banking practice at Deutsche Bank Securities.
Shipping, he said, accounts for 15 to 20 percent of the value of prospective listings in New York now. "It certainly is unusually high market activity for this nonsexy industry, in terms of I.P.O.'s," said Jay R. Ritter, a finance professor at the University of Florida.
It's unusual, but not illogical, Professor Ritter said. The I.P.O. market tends to have a flavor of the month, and right now, with all the attention being paid to world trade, it's shipping. Despite signs that the ship leasing market is softening, the stock issues are still coming, although offering prices have begun to decline.
"The perception is that the shipping group is still very strong, despite coming off recent highs," said Joe Morea, head of United States equity capital markets at RBC Capital Markets in New York.
For some investors, shipping stocks offer a way to capitalize on the strong growth in the Chinese and Indian economies, said Mons Bolin, president and chief executive of Aries Maritime Transport, which is based in Athens; the company went public on June 3.
Demand for ships is high, partly because they are needed to haul the surge of Chinese and Indian imports of raw materials and fuel - and exports of consumer goods destined for markets like the United States.
Demand can be measured through charter rates - the charges for leasing a ship. These rates are highly volatile. They generally peaked late last year and began falling this spring, in time to depress the market offering prices of the spate of new shipping company issues.
Charter rates have declined for both of the major categories of ships owned by the companies with new stock offerings. These are dry bulk ships - which haul dry, raw material like grain or ore - and crude-oil tankers. Most recent dry bulk shipping company stock issues are trading below their offering prices, while tanker operators like Aries Maritime have generally done better.
The industry's recent I.P.O.'s, including Aries, were generally priced below their expected ranges. Aries opened trading at $12.50 a share; it originally sought to list shares at $14 to $16. It is now at $14.71.
Aries has been insulated from some of the volatility of the charter market because it has accepted longer-term leasing deals, Mr. Bolin said.
"Good, experienced ship operations with longer-term charters perform substantially better in U.S. equity markets," Mr. Morea said.
The stock performance of the shipping industry has been mixed this year, according to indexes compiled by Deutsche Bank. Stock prices of oil tanker operators were up 14.8 percent, significantly ahead of the 1.2 percent price gain of the Standard & Poor's 500-stock index. In contrast, dry bulk carrier stocks have declined 5.7 percent, and container ship stocks are up 11.7 percent.
In addition, many companies planning to offer shares have had to lower their sights.
For example, Quintana Maritime of New York, which early this summer planned to sell 16.7 million shares at $14 to $16 each, cut the price of its July 5 offering to $11.50. The stock is now at $11.58. Quintana operates eight larger-size dry bulk ships.
Weakness in the charter market may mean that several offerings will fall through. "Not all deals will get done," Mr. Feuhrer said.
The Capital Maritime and Trading Corporation, which had sought to raise $306.7 million through an I.P.O., in late June withdrew its plan for a $14-to-$16-a-share offering, according to S.E.C. documents. Investment bankers had reported slackening interest in the I.P.O. among institutional clients.
While demand for tankers will remain strong this year, it will not reach the levels of 2004, said Royal Shepard, an equity industry analyst at S.& P. in New York.
Daily charter rates for tankers carrying 200,000 to 300,000 tons of cargo and supplies averaged about $62,000 in the second quarter, versus more than $100,000 in the fourth quarter of 2004, Mr. Shepard said. That is when charter rates hit a three-decade peak, reflecting increased global demand and strained tanker capacity, he noted.
Charter rates for dry bulk ships have also been volatile because utilization is high, approaching 95 percent of capacity, said Barry Parker, of bdp1 Consulting of Bayville, N.Y. "Small increases in demand quickly translate into higher charter rates that generally go to the bottom line for operators of these ships," he said. Of course, small declines in demand can put a big dent in profits.
New issuers are generally using I.P.O. proceeds to reduce debt incurred when creating or expanding their fleets, to cash out original investments or to buy additional vessels. The world's shipyards are already working full tilt, so the offerings are unlikely to result in an immediate increase in global shipping capacity.
Beyond worrying about charter rate volatility, investors may be concerned that many new shipping companies have limited operating histories because they were formed specifically to buy and manage newly acquired ships.
Finally, there is history to consider. The first-day returns for shipping I.P.O.'s are well below the historical average for I.P.O.'s in general, according to Mr. Ritter.
From 1988 to 2004, the average first-day return for 13 shipping industry I.P.O.'s was 2 percent, compared with 21 percent for 5,137 other I.P.O.'s during the same period, he said. And from 1988 to 2001, the 10 shipping companies that had I.P.O.'s and histories of at least three years had an average return, excluding first-day gains, of just 5.6 percent a year over their first three years. That compares with 6.9 percent for other I.P.O.'s during the same period, Mr. Ritter determined.
nytimes.com |
