Digicel: We made the right decision to pull IPO
Denis O'Brien, Digicel founder and chairman, said that his board made the right decision to pull the company's initial public offering on Tuesday.
"We're very happy that we pulled the IPO and we'll come back to the market in time, and when the market conditions are right for our business," he told CNBC's " Squawk on the Street " Wednesday.
The Caribbean telecommunications company that sponsors sprinter Usain Bolt and the West Indies cricket team, announced on Tuesday that it had decided to withdraw its plans to go public for now, citing "current conditions, particularly in emerging markets."
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It is owned by Irish billionaire O'Brien and was expected to make as much as $2 billion from its U.S. IPO. Digicel operates different businesses including mobile phone, fixed line and cable TV in the Caribbean, Central America and the Pacific Islands. It has about $2.8 billion in revenue, said O'Brien.
He said that volatility, especially in emerging markets, discouraged him from pursuing the public option at this time. "We're not backed by private equity, it's all owned by myself and my colleagues so we didn't need to do an IPO at any time; it was opportunistic from our point of view," he said. "We'll come back and we don't need any funding at the moment. It's a great feeling not to need any funding."
Last week, all the five companies that made their market debut, including Surgery Partners (NASDAQ: SGRY), Performance Food Group (NYSE: PFGC) and Edge Therapeutics (NASDAQ: EDGE), cut their offer price below the expected price range.
With volatility across global markets this year, 46 companies withdrew their IPO plans as of Sept. 30, compared with 38 companies last year, according to Renaissance Capital data.
Some IPO deals may require a 20 percent pricing discount, compared with the benchmark 10-15 percent range, in light of the current volatility, bankers noted at the IFR ECM event held at Thomson Reuters' offices last month.
Digicel's balance sheet is very weak, Francis Gaskins, president of research firm IPO Desktop, said.
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"It's a big company that has been losing money since it started," Gaskins said. "They've been growing subscribers at 2 percent a year."
Digicel reported a loss of $157.6 million on revenue of $2.79 billion for the year ended March 31, compared with a profit of $43.5 million on revenue of $2.75 billion a year earlier.
""Their revenue is flat, they are losing money, the company is not growing — it would not be seen as the most attractive of investments," said Jay Ritter, professor of finance, University of Florida.
Digicel, however, reiterated that its growth plans remained unchanged and it would be looking at strengthening its interests in data, business solutions, cable TV and broadband.
— Reuters contributed to this report.
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