Intrepid Potash debut not reflective of U.S. IPO market

By Jui Chakravorty Das

NEW YORK (Reuters) - Crop nutrient producer Intrepid Potash Inc's (IPI.N: Quote, Profile, Research) initial public offering this week, while hugely successful, has not planted any seed for hope in an IPO market undermined by investors spooked from the credit crisis.

Despite a weak IPO industry that potential debutantes have been shying away from, Intrepid Potash's share offering priced $6 above the top of the initial forecast range of $24 to $26 on Monday, raising $960 million.

The stock rose 50 percent the morning after it was launched on the New York Stock Exchange and underwriters have exercised their right to buy an additional 4.5 million shares.

But experts said Intrepid Potash's success was unique to the fertilizer company and was not reflective of the overall health of the IPO market, which has suffered from investor panic as the subprime crisis led to a credit squeeze.

Experts say investors are holding back from taking the plunge into IPOs until there is more clarity and stability in the stock market.

"Intrepid was the perfect case of a company going public at the right time at the right place and in the right industry group," Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles, said.

Shares of North American fertilizer producers have risen dramatically in the last 12 months -- and companies with sizable potash assets have been among the biggest winners in the sector.

Rising demand for grain across the globe, driven largely by the growing needs of developing economies and the increasing use of biofuels, have led to soaring food grain prices.

BUMPER PROFITS

Farmers trying to boost yields are using more fertilizers, leading to tight global supply conditions for crop nutrients and bumper profits for fertilizer producers.

"That's unique to Intrepid Potash," Morreale said. "This is not an IPO market willing to tie to the upside. It's a very individualized IPO market where people are looking at each individual deal very closely."

Except for the March blockbuster $17.9 billion offering of Visa Inc (V.N: Quote, Profile, Research) and this week's Intrepid Potash debut, none of the U.S. offerings have priced above their range this year.

In the same period last year, 22 offerings had priced above their range, according to data tracker Dealogic.

More than 40 U.S. IPOs were withdrawn or postponed this year, compared with 20 in the same period a year ago.

Moreover, the IPO market has seen only 27 IPOs this year -- compared with 78 in the same period last year.

"Intrepid was a special case," said Francis Gaskins, president of IPOdesktop.com.

Indeed, another company, American Water Works (AWK.N: Quote, Profile, Research), debuted the day after Intrepid Potash. The unit of European utility company RWE AG fared a lot worse.

In a telling sign of the state of the IPO market, the American Water Works IPO priced at $21.50 per share, below the original target of $24 to $26 a share.

Shares of the largest U.S. private-sector water utility fell 5 percent in their market debut on the New York Stock Exchange.

The IPO, which had been postponed from its originally planned November 2007 launch, was initially intended to be 64 million shares, but sold only 58 million.

FILED LAST AUGUST

RWE, which had been working toward the IPO of American Water Works' IPO since deciding to pull out of the water business in November 2005, filed for the share sale last August but put it off three months later after stocks tumbled.

"What the market needs is companies not counting on the private equity sector," Gaskins said. "The companies that have internal top-line revenue growth and, if not profitable, then very close to profitable -- those companies are not showing up on the radar right now."

The handful of U.S. IPOs expected through May include Pioneer Southwest Energy Partners -- a limited partnership recently formed by Pioneer to own and acquire oil and gas properties.

That company has revised its number of shares for the offering down to about 8.2 million from 12.5 million. Its revised price range is $19 to $21 a share.

Also expected is the IPO of Real Goods Solar, a residential solar energy integrator. The company plans to file 5 million shares between $10 and $12 each.

Digital Domain, the visual and animation company which has created effects for films like "Titanic," "The Transformers" and "Pirates of the Caribbean," was expected to IPO this week but has not debuted yet.

"The credit problem is like a tourniquet cutting off blood flow to emerging growth companies," Gaskins said.

"This trend won't last forever but I don't see it changing in the near future."