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IPO Scorecard: Norwegian Sails Successfully

The Exchange

The cruise industry has experienced a wave of negative publicity in recent months, from February’s five-day sea voyage from hell on a Carnival (CCL) ship to the recent outbreak of the notorious norovirus on a Royal Caribbean (RCL) trip. On Thursday yet another report on power outages and overflowing toilets aboard a Carnival ship was released.

These wildly unpleasant and highly publicized events followed some more-tragic cruise-related headlines, including the January 2012 capsizing of the Costa Concordia in the Mediterranean Sea.

Credit: Associated Press

But a smaller cruise line is actually emerging as a winner on one list in 2013: The IPO returns tally. Norwegian Cruise Lines (NCLH), which went public in January at an offer price of $19 per share (above the expected range of $16 to $18), has so far returned 62% to its earliest investors. Its first day of trading saw more than a 30% lift, with the stock closing at $24.79. Shares are now trading at more than $30.

[See related item: Facebook Debacle Stands Out in Mixed Year for IPOs]

The company raised $447 million during the initial offer, with the intent of using the proceeds to pay back the hefty amount of debt it accrued under expansion by its owners Apollo Global Management, TPG Capital and Genting Hong Kong Ltd. (which owned all of Norwegian before Apollo and TPG paid $1 billion for 50% of the equity in January 2008).

A distant third

The Miami-based Norwegian is, by market cap and ship fleet, a far smaller outfit than Carnival and Royal Caribbean. Carnival is the ocean queen, with a $27 billion market cap and fleet of 99 ships, while Royal Caribbean is a distant second with a $7.3 billion market cap and 39 ships. Norwegian has a $6.2 billion market cap and just 11 ships now sailing, although late last year the company announced that a 12th ship -- the massive, 4,000-passenger-capacity Breakaway -- will debut in April. Two more ships are set to sail in January 2015 and October 2015.

Investors in Norwegian obviously see an incremental growth opportunity in this smaller brand, and its first earnings report since going public surprised to the upside, showing profits of $127 million compared to $169 million the year before and a full-year revenue increase of 2.6% at $2.27 billion.

Norwegian is one of 23 IPOs in the U.S. market that have priced so far this year, compared with 25 at this time in 2012, according to Renaissance Capital. The IPO market in 2012 was a decidedly mixed one, with the high-profile Facebook (FB) faceplant seeming to define the year in offerings, even as some debuts -- such as Annie's (BNNY) and Guidewire Software (GWRE) -- saw very healthy returns. Since 2010, the total number of companies that have entered the public realm has been firmly in the low triple-digits, following the dismal number of IPOs seen in 2008 and 2009 as the financial crisis froze the market.

Sentiment around this year's offering activity seems to be mixed. In February, an Ernst & Young survey of institutional investors showed that a vast majority -- 82% -- were in the IPO market in 2012 as compared to an anemic 18% in the two years before. In published comments, Maria Pinelli, the global vice chair of strategic growth markets for Ernst & Young, said, "Not only was there a significant pick up in interest in 2012 but the sentiment for 2013 is equally positive if not more so.”

But another survey conducted at the end of last year by KCSA Strategic Communications found that only 35% of market professionals surveyed believed the IPO arena would improve this year, while 65% expected it to remain flat. And another survey released in January by consulting firm BDO USA found that the majority of investors do not believe the JOBS Act -- which relaxed rules for the filing of offerings by smaller companies -- will boost the number of IPO filings.

The IPO proceeds raised in 2013 are up a hefty 73.5% compared with this time last year, at $5.9 billion vs. $3.4 billion. The average return on offer prices so far has been 17.8%, with the financial sector seeing the bulk of the filings. Technology has seen just two entries, including second-place loser Professional Diversity Network (IPDN), whose shares have dropped 10% from their original $8 offer price. Last year, tech accounted for 24% of all IPO deals.

Wednesday saw the second tech sector debut of 2013, as "smart" electrical grid company Silver Spring Networks (SSNI) shares began to trade on the NYSE at $22, or 29% above their offer price of $17; the deal raised $80.6 million. Six more companies are on the calendar to price this month, and the more highly anticipated expected debuts of the year include Sea World and Fairway Markets.

Below, you will see a scorecard of the five best and worst IPOs of the year so far, based on returns from the offering price (as of 3/14).


Company Ticker Offer First Day Total Return
Norwegian Cruise NCLH $19.00 +30.5% +62%
ExOne XONE $18.00 +47.3% +56.4%
Xoom XOOM $16.00 +59.3% +47.2%
Boise Cascade BCC $21.00 24.5% +44.2%
Bright Horizons BFAM $22.00 28.7% +36.4%


Company Ticker Offer First Day Total Return
KaloBios Pharmaceuticals KBIO $8.00 +0.0% -19.8%
Professional Diversity IPDN $8.00 -4.1% -10.8%
Orchid Island Capital ORC $15.00 -3.3%% -3.8%
ZAIS Financial ZFC $21.25 -6.1% -3.3%
Health Insurance Innovations HIIQ $14.00 -2.1% -2.7%