DJ UPDATE: Nymex Stock Doubles On Opening Trade Post-IPO
By Lynn Cowan Of DOW JONES NEWSWIRES
November 17, 2006
Investors had been eagerly anticipating the debut of energy futures exchange Nymex Holdings Inc. (NMX) Friday, and the operator of the world's largest physical commodities futures exchange didn't disappoint.
The stock opened for trading on the New York Stock Exchange at $120 a share, up 103% from its IPO price of $59. The company sold 6.5 million shares at a price above its expected range of $54 to $57, which was raised earlier in the week by underwriters JPMorgan Chase & Co. (JPM) and Merrill Lynch & Co. (MER). It was trading recently at $139, up 136%.
At that trading level, Nymex is on track to become the best first-day performer among IPOs this year, beating the former titleholder, burrito chain Chipotle Mexican Grill Inc. (CMG), which rose 100% on its first day of trading in January.
Nymex's deal caps off another strong week in the IPO market, with nine deals pricing, the majority of which made gains on their first days of trading. It's also the latest in a series of well-received IPOs from U.S. exchanges. The Chicago Mercantile Exchange Holdings Inc. (CME), the Chicago Board of Trade's CBOT Holdings Inc. (BOT) and IntercontinentalExchange Inc. (ICE) all had double-digit percentage gains on their first days of trading in recent years, though Nymex's appears set to beat the best: IntercontinentalExchange rose just 51% on its debut in November 2005.
If it follows in the path of its peers, more gains are ahead for Nymex. IntercontinentalExchange has tripled since its $26-a-share initial public offering in November 2005, and CBOT is also trading at nearly three times its October 2005 debut of $54. The CME, which went public at $35 in December 2002, is now selling for close to $540 a share.
IPO analysts say they believe Nymex's stock will continue to stay strong in the months ahead. Ben Holmes, publisher of Morningnotes.com, a research firm that tracks IPOs, said institutional investors who are focused on their year-end performance statistics will be reluctant to jettison Nymex from their portfolios.
"Nobody is going to sell this deal before year-end. Big winners like this make perfect window dressing," he said.
Nymex is operating in a strong overall market environment for derivatives trading, with non-equity futures and options contracts growing at a compound annual rate of 28% in the U.S. In the first nine months of the year, Nymex's net revenue increased 51% to $381.5 million, and its net income more than doubled to $112.5 million, compared with the same period of 2005. Trading and clearing volumes rose, and average revenue per contract increased due to a shift in the exchange's customer trading mix, since certain customers are charged higher rates per trade than others.
Nymex has been working to regain market share as investors have favored electronic platforms over Nymex's traditional floor, where traders shout buy and sell orders. Electronic exchange ICE recently wrested the title of world's biggest crude oil-futures exchange by volume from Nymex.
In one significant change, Nymex this fall launched round-the-clock electronic trading of its benchmark crude contract on the Chicago Mercantile Exchange's Globex platform. Its screen volume has since been steadily beating floor trading volumes.
Yet even as it increases electronic trading, the exchange can't swiftly change its floor-trading model. Its bylaws prevent the board of directors and its new shareholders from changing the trading-rights protections of its seat holders, committing them to supporting open-outcry floor trading. Only the floor seat holders have the power to suspend or restrict open-outcry trading, and they also have veto power over any new fees or charges that apply to them, any restrictions on what they trade and trading hours.
Nymex warned in its prospectus that it expects to see downward pressure on the fees it charges as competitors cut their prices and offer more products.
Also trading for the first time Friday were oil and natural gas exploration company Venoco Inc. (VQ) and solar module maker First Solar Inc. (FSLR).
First Solar's stock opened at $24.50 a share, up 23% from its IPO price of $20 a share. The company, based in Phoenix, sold 20 million shares at a price above the expected range of $17 to $19 a share, which was set by underwriters Credit Suisse and Morgan Stanley (MS).
First Solar has avoided an expense issue facing other solar module manufacturers: There is a worldwide silicon shortage, the primary raw material in most solar cells. Instead of relying on silicon, the company uses a proprietary technology based on a more plentiful raw material, cadmium telluride, allowing it to reduce costs. Its net sales and gross profit have more than doubled in the first nine months of 2006 compared with the same period in 2005, but the company has a history of net losses.
Venoco's stock opened at $17 a share on the NYSE, flat with its IPO price, and made minor gains in early trading. A total of 12.5 million shares were sold at a price below the expected range of $19 to $21, which was set by underwriters Credit Suisse Group (CS), Lehman Brothers Holdings Inc. (LEH) and JPMorgan. Of the total shares sold, 2.5 million were offered by a family trust controlled by the company's chief executive, Timothy Marquez.
The Denver-based company, which owns oil and gas reserves in California, offshore southern California and along Texas' Gulf Coast, saw its revenue more than double in the first nine months of this year to $201.6 million, while its net income rose to $21.7 million compared with $129,000 in the same period of 2005. Most of the revenue increase was due to the company's acquisition of TexCal Energy. |
