Softechie:
I think I'll pass on this one also. Schwab's tech IPO offerings have performed quite well, but this one in the health care field doesn't give me a good feeling.
In particular, the details of the prospectus show that a very large portion of the proceeds of the IPO will go to compensate the principal stockholder (Welsh, Carson, Anderson and Stowe), with a smaller portion of the proceeds left over to benefit the company. About $31M will go to redeem the preferred stock, which is 97% owned by Welsh. Another $11M will go to buy back 10% notes, again held by Welsh (this use of IPO funds is actually good for the company, and is bad for Welsh, since they'll lose out on 10% interest through 2004).
Getting rid of the preferred stock dividends will provide nice earnings, however. For the last six months of 1998, the EPS would have been $0.30 if the preferred stock were eliminated. Assuming the next six months provides the same EPS (probably conservative), this would give 1999 fiscal year earnings of about $0.60, for a P/E ratio of 27 (assuming a $16 IPO price). Still not too exciting to me, however.
Adam |
