The IPO market will see two weeks in a row with an initial
public offering from a company taken out of bankruptcy in a PE
Last week, radio station operator Townsquare Media (
) priced 27% below the range and ended the day below issue.
The heavily discounted IPO raised $92 million, with an IPO
market cap of $298 million ($772 million
EV). Since Oaktree Capital bought the company in 2010,
Townsquare has acquired portfolios of failing radio stations,
increasing its footprint from 62 to 312 and returning to
profitability ($92 million EBITDA in 2013; 27% margin).
), which was bought in 2008 by Aurora Capital and Sam Zell,
reduced its exposure to real estate after its bankruptcy and now
operates an asset-light corporate relocation services model on
top of a franchised transportation company. The Oakbrook,
IL-based company plans to raise $185 million at a fully diluted
market cap of $637 ($904 million EV).
Often bought by PE firms at fire sale prices, bankruptcy
turnaround LBOs could have IPO investors demanding a valuation
haircut as well. Given the performance of April IPO Sportsman's
Warehouse (SPWH, down 36% after pricing below the range),
investors may question these companies' growth and credit risk
this time around.
The 18 LBOs year-to-date have averaged a 2% loss, and 61% trade
at or below their offer price. The larger deals have generally
outperformed the smaller ones. Average post-IPO return for LBOs
is -4% this year, far behind the IPO ETF's +4% gain. The ETF, a
basket of recent IPOs and a benchmark for post-IPO performance,
has traded up 2% today after Twitter (
), its second largest constituent, beat earnings and jumped 20%.
Recent LBO Performance
Deal Size ($mm)
IPO Price vs. Midpoint
Return as of 7/30
|Townsquare Media (
|LBO'd IPOs - average 90 days
|LBO'd IPOs - average YTD
|IPO ETF - YTD