What's going on?
In a move that could help bring a red-faced initial public offering (IPO) market back from the brink, Calisen – the UK-based energy firm owned by private equity heavyweight KKR – announced plans to list on the stock exchange.
What does this mean?
Calisen specializes in smart meters that help consumers keep tabs on their energy usage. And with five million of them currently installed, the company generated about $190 million of revenue and $171 million of profit in the first nine months of 2019.
KKR – which bought Calisen back in 2016 – is eyeballing a valuation of up to $2 billion in the company’s share sale, which is on track to be this year’s first high-profile IPO (tweet this). The private equity firm will bag a tidy profit by selling part of its stake in the business, while Calisen will be able to use some of the money it makes selling new shares to pay off its debts.
Why should I care?
For markets: Dancing to a new tune.
Last year started pretty optimistically for IPOs, with analysts expecting the likes of Uber and WeWork to be unmitigated successes. They were not. Newly listed companies instead found themselves battling geopolitical uncertainty and investors more focused on future profitability than revenue growth. So while 60% of stocks fall below their initial prices after five years, most of last year’s new entries saw no such delay. The hope is that Calisen will break the habit in 2020, paving the way for the market debuts of home-sharing app Airbnb and mattress brand Casper later in the year.
The bigger picture: What a downer.
If this year’s IPO market ends up disappointing, Cantor Fitzgerald’s recent predictions may have been proved right. The investment firm doesn’t think economic growth will pick up as hoped, and expects stocks – which they think are too expensive – to fall. They’re not alone: a survey this week showed fewer investors are feeling positive about the stock market.