Three IPOs Drop Off the Calendar

Citing “poor market conditions”, three firms pulled their initial public offerings from the calendar this week, which was expected to be the busiest for pricing activity since November 2007.

Defense contractor ADS Tactical and Uruguayan Union Agriculture made the announcement Wednesday, following the postponement of Orchid Island Capital’s IPO on Monday.

All three companies had warnings signs for investors, according to analysts.

ADS Tactical, which hoped to raise $204 million, is too heavily dependent on government contracts at a time when defense and government spending are under scrutiny, says Francis Gaskins, president of research firm IPO Desktop.

And company insiders recently took a lot of money out of the company through past dividends and bonuses, according to Renaissance’s Bard. “Insiders were also selling on the IPO, which is always a difficult sell.”

Union Agriculture Group, which grows crops and cattle in Uruguay, looked like an interesting asset play, says Bard, but it was too young and small to spark investor interest. The company planed to raise $200 million by offering 14.3 million shares at a price range of $13 to $15.

“This one was really more about timing and speaks to the current risk appetite in the market,” says Bard. When it comes to young firms, “the only deals investors are willing to look at seem to be Internet companies experiencing rapid growth.” Gaskins believes the firm is better suited for a private placement than for an IPO.

Orchid’s IPO postponement did not come as a surprise to analysts. The company, which invests in residential mortgage-backed securities, cut its offering size last week to 5.2 million shares at a price of $8, from 7.5 million at a range of $10.00 to $12.00.

“It was a newly-formed entity that lacked a meaningful track record or unique investment case”, says Bard.

Six more deals are expected to price this week: Horizon Pharma (HZNP), Teavana (TEA), The Chefs Warehouse (CHEF), Wesco Aircraft (WAIR), WhiteGlove Health (WGH), and C&J Energy Services (CJES).

IPOs this week : July 25 - 29, 2011 (wk 30)

There are 11 IPOs scheduled for the week, making it the busiest since November 2007, according to IPO investment adviser Renaissance Capital. 

The heavy action is a continuation from last week, when Zillow Inc. (Z) and Skullcandy Inc. (SKUL) led a handful of companies into the public realm.

The influx in IPOs may be attributed to recent concern about the U.S. deficit, and the potential that capital may dry up if debate over the debt ceiling is not resolved.

One is ADS Tactical Inc., a U.S. defense supply-chain middleman specializing in tactical and operational equipment. The stock was expected to begin trading Friday under the proposed ticker “ADSI.”

The Virginia-based company hopes to raise $204 million by offering 12 million shares, valued at a price range of $16 to $18 apiece. ADS Tactical plans to list on the New York Stock Exchange with J.P. Morgan, Morgan Stanley, and Wells Fargo Securities as the main underwriters. Sweet said that the talks in Washington over the debt ceiling “may be having an impact,” though earlier signs shows strong demand for the shares.

C&J Energy is also generating some buzz, Sweet continued. The Houston-based provider of fracturing services for the oil industry is also looking to join the NYSE under the symbol “CJES.”

The company plans to raise $305 million, offering 11.5 million shares at a price range of $25 to $28 a share. J.P. Morgan is again the underwriter, along with Goldman Sachs and Citigroup.

Teavana Holdings is a specialty retailer of loose tea with 163 stores across the United States and 17 in Mexico. The Atlanta-based company will look to use the symbol “TEA” on the New York Stock Exchange. It is expected to offer 7 million shares priced between $13 and $15, in an effort to raise $100 million. Goldman Sachs and Bank of America Merrill Lynch are the lead underwriters.

Four more companies will be looking to trade on the Big Board.

Energy company American Midstream Partners (AMID), agricultural firm Union Agriculture Group (UAGR), aerospace-part distributor Wesco Aircraft Holdings (WAIR) and health-care organization WhiteGlove Health (WGH) would bring the total NYSE offerings to eight.

The Nasdaq market is set to add three companies.

Food-product distributor Chefs Warehouse, communication management-software provider Tangoe Inc., and pharmaceutical firm Horizon Pharma Inc. are all expected to make their debuts this week. Horizon’s offering comes as the company plans to commercially launch its two main products, treating ulcers and arthritis pain.

All the companies are surely hoping to see some of the success of last week’s IPOs. Zillow closed at a 71% premium, while Francesca’s Holdings FRAN -2.19% , a women’s clothing boutique, saw a 63% pop.

Originally there were 12 IPOs expected for the week; however, Orchid Island Capital, a finance firm, chose to postpone its deal.