Primerica Inc, a unit of Citigroup Inc powered by an army of agents selling financial services to friends and neighbors, on Thursday had one of the best-performing initial public offerings so far this year as investors were comforted by the notoriety of its parent and were drawn to a low offering price.
The Primerica offering comes as analysts expect technology and financial companies to lead an IPO market comeback. Five newly public companies have posted double-digit gains on their first day of trading in the past two weeks.
Since late last year, IPOs have stumbled as competition between investment bankers inflated offering prices. Many IPOs that have made it to market this year have accepted lower prices for their shares due to a volatile stock market and worries about companies’ debt loads, weak operating histories and slow growth.
Citigroup kept Primerica’s price low because it was determined to divest the unit, analysts said. As an increasing number of companies offer shares at attractive prices, demand for IPO shares is likely to grow.
“Right now, these companies are leaving money on the table, and that’s like honey to bees,” Francis Gaskins of IPOdesktop said.
Shares of Primerica surged US$4.65, or 31 percent, to close at US$19.65 after the deal raised US$320.4 million by selling 21.4 million shares for US$15 apiece to initial investors. The stock, which reached US$20.20 during the session, trades under the ticker “PRI.”
While the household names and low price were big enticements, investors were also encouraged by an unusual move by private equity firm Warburg Pincus, which agreed to buy a 23 percent to 33 percent stake in the company at the IPO price.
“Private equity firms generally want to pay dimes on the dollar, but obviously Warburg considers this a gem,” IPO market tracker Scott Sweet of IPOBoutique said.
“This was the first time I’ve seen a private equity firm make a big commitment at the public IPO price,” Gaskins said. “Normally, they get sweetheart deals and public be damned. All investors needed to know for this deal was that they were paying the same as Warburg Pincus.”
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