The Wall Street Journal-20080122-IPO Outlook- RiskMetrics Shapes Up as a Bellwether- Analytical Firm Has Good Timing- The -Perfect Storm-
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IPO Outlook: RiskMetrics Shapes Up as a Bellwether; Analytical Firm Has Good Timing; The 'Perfect Storm'
A share sale for RiskMetrics Group Inc. this week could go a long way toward determining whether the new-issues market will have a smooth or bumpy ride in the early part of the year.
The initial public offering, which could raise as much as $266 million, is expected to generate strong interest from investors. The company's main focus is portfolio risk-management analysis, and analysts say the timing couldn't be better.
"It seems like for this company, recent events have created the perfect storm. It's pretty clear that banks are having trouble measuring risk," says Marino Marin, an investment banker at Gruppo Levey & Co., which isn't involved in the IPO. "How the broader market is doing is kind of irrelevant, because this business is so spot-on."
But if this offering struggles, it would be a sign that investors aren't likely to be very amenable to other deals. The Dow Jones Industrial Average is coming off a 4% loss for the week and an 8.8% loss for the month so far, its worst start ever to a year. Investors were lukewarm toward the week's only offering, a $325 million share sale for energy company Williams Pipeline Partners LP. On its Friday debut, it ended unchanged from its $20 offering price.
Besides RiskMetrics, a handful of other IPOs are expected this week. They include U.K.-based international water-services company Cascal BV and hospital-staffing specialist IPC The Hospitalist Co. Both operate in growing industries as more countries privatize their water services and hospitals outsource their specialty staffing needs.
At New York-based RiskMetrics, revenue doubled and operating income rose 68% in the first nine months of 2007, compared with the same period in 2006. Net income declined due to higher interest expense related to debt incurred for its purchase of ISS, which provides corporate-governance and proxy-voting research, in January 2007.
Some 14 million shares are being offered to investors at $17 to $19 each. Trading is expected to begin Friday on the New York Stock Exchange.
An offering from competitor MSCI Inc., which offers risk-management services through its Barra unit, had a well-received IPO of its own in November. It rose 45% on its first day of trading and closed Friday at $29.32, up 63% from its $18 IPO price.
Both MSCI and RiskMetrics chose to tap the public markets after this summer's subprime-mortgage mess and the ensuing credit crunch. In both cases, major stock indices in the U.S. were on a downward trend when their debuts were set.
"Risk management for financial institutions in the wake of the subprime-mortgage meltdown is a pretty timely business," says Ben Holmes, publisher of research site Morningnotes.com. "Their products and services are germane to the environment we're in now."
Beyond this week, companies that have registered for U.S. IPOs are starting to set pricing terms in anticipation of future debuts, including Chinese educational-testing services company ATA Inc. and intermodal-equipment lessor Seacastle Inc.
