Bausch + Lomb Corp. is expected to value its IPO below expectations late Thursday in the latest sign of the challenges surging share prices pose to the new issuance market.
On Thursday, as stock market crash, the bankers in the deal told potential investors the stock would likely be priced at or below the target range of $21 to $24 a share, according to people familiar with the matter. with this problem. The company has aimed to raise $840 million ahead of Friday’s scheduled listing, according to a regulatory filing.
Some said they have slashed their forecast valuation to about $8 billion, or less than half of previous expectations.
The launch of the eye care company, a spin-off of
Cos., is being watched closely as an impetus for the IPO market, which has been largely shut down since shares began falling earlier this year. This is the first major IPO since the private equity firm
to the community mid-January. After a record year in 2021, traditional IPOs have raised less than $3.3 billion by 2022, the slowest start since 2016, according to Dealogic.
Bausch is a fitting test case for the IPO market, providing a significant amount of cash and visibility for startups as well as Wall Street. The company is profitable and is a reputable name in the industry.
“It’s been a really important week for the IPO market,” said Jeff Zell, senior research analyst at IPO Boutique. With so few IPOs so far this year, “It is extremely important that this IPO is not only on track, but also trades steadily in the aftermarket,” he said.
Among those who will be watching closely are others on the IPO runway. Fund managers said they met with executives at companies this year, including
Intel Of Corp.
The $50 billion or more self-driving car unit Mobileye and Steinway Musical Instruments Holdings Inc., said they are pursuing an IPO. Others considering listing later this year include ServiceTitan Inc. and Quick Quack Car Wash Holdings LLC, according to people familiar with the matter.
That doesn’t help as markets have been particularly volatile lately, with the tech-heavy Nasdaq Composite index gaining more than 3% on Wednesday and down more than 4% so far on Thursday. The index has gained at least 1% in both directions in 10 of the past 12 trading sessions.
Traditionally, volatility has been considered the most important indicator for the IPO market. When a company launches an IPO, its management team and advisors spend a few days on so-called roadshows, meeting with fund managers to entice them to buy shares. A volatile market, with little visibility into the next day let alone week, makes that difficult.
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There is another, less appreciated, factor driving the gears of the new issuance market, bankers say. The correlation between individual stocks in the S&P 500 has increased significantly in recent months on concern that rising interest rates could spark a recession leading to widespread selling. That makes stock pickers harder and makes IPOs less attractive, according to some analysts. Fund managers expect better performance from IPOs, and if stocks move almost in unison, the likelihood of that getting there becomes longer.
In the three months before tech stocks began to fall in December on inflation and interest rate concerns, the average stock moved in the same direction as the S&P 500 39% at the time, according to Ned Davis Research. Since then, that number has grown to 61%.
Some fund managers welcomed the upcoming atmosphere from the IPO market.
Jonathan Coleman at Janus Henderson Investors, who oversees more than $14 billion of the two funds, said last year the IPO market was so hot it was difficult to get meaningful allocations in the offerings. Previously, Mr. Coleman said he thinks the market is buoyant when there are bids 10 times the number of shares available in an average offering. By the end of 2020 to the end of 2021, book orders are often oversubscribed by 30-40 times, he said.
“My experience is, if we are lamenting the lack of IPOs now, we will be lamenting the flooding when the windows reopen,” he said.
Write letter for Corrie Driebusch at [email protected]
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