First Data Corp. and Albertsons Cos. have put their IPO dreams on hold amid choppy market. The companies' postponement came because of the lingering investor skittishness and market volatility. On Wednesday, First Data reduced its IPO by 17 percent, pricing the shares $2 less than the low end of the proposed range.
First Data was seeking to increase as much as $3.2 billion in what would have been the biggest U.S. offering this year while Albertsons was planning to raise as much as $1.7 billion, Bloomberg Business revealed. While First Data's revenue increased under the leadership of CEO Frank Bisignano, the company's growth is much slower than the pace of global payments.
In addition, First Data is also facing increasing competition from startups while retailers demand better terms. Thus, the payment processing company is losing its market share. And even though First Data as well as supermarket operator Albertsons Cos. had planned to continue their plans to price their IPOs on Wednesday, investors' reception for most IPOs have been cold since the stock market downfall in August.
In order to go through with their IPOs, First Data and Albertsons have had to discount them heavily to lure risk-averse investors. While some IPOs have proved to be good bargains based on how their shares have traded following their listing, the bruising experiences of several companies are expected to put off more IPO hopefuls in the near future, Reuters reported.
"Since labor day, IPOs have priced on average 18 percent below the midpoint of their range, returning 16 percent for investors," investment banking boutique Renaissance Capital LLC Managing Director Kathleen Smith said. "In order to get those positive returns, prices are being slashed."
Smith also added the investors' reaction to First Data and Albertsons show that more companies will possibly hold back from launching IPOs or continue to discount them if they go ahead with them.
Meanwhile, First Data's debt load is a notable hindrance on its profitability, Tech Crunch noted. But if First Data weren't in such massive debt, it would have a tidy profit. While the company is having a hard time managing both its obligations and profitability, the company's scale is remarkable. In fact, the firm had $5.56 billion in revenue during the first half of 2015, which puts it on a path to revenue in the 11 figures this year.
First Data, Albertsons and other private equity-owned companies have been determined to launch their IPOs so they can pay down some of the debt they owed following their leveraged acquisitions.
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