Will Ivanplats follow Facebook’s IPO Path?

Aerial view of Ivanplats' Kamoa copper project, Democratic Republic of Congo.

It what was the most widely anticipated IPO in Canada this year, Ivanplats raised $300 million last week and began trading on the TSX Exchange.

Ivanplats (Stock Profile – TSX:IVP) is Robert Friedland’s latest mining company to hit the public markets in what has been an 18-year story of exploration persistence in Africa. The company’s two primary projects are the Kamoa copper deposit in the Democratic Republic of Congo and the Platreef platinum-palladium-gold-nickel-copper deposit in South Africa.

The Ivanplats offering was priced at $4.75 a share valuing the company at a whopping $2.5 billion. The deal was priced slightly above the bottom end of the range – the company was seeking between $4.50 to $5.40 a share. Upon the IPO, shares of the company spiked to a high of $5.20 but have since been trending down and, today, are right back at $4.75.

The 63.3 million share offering was underpinned by one large investor, who purchased nearly a third of the shares offered. Ivanplats did not disclose the identity of the investor but rumor has it Brazilian billionaire Eike Batista may be the buyer. Regardless of identity of the buyer, the company did say the investor agreed to a six-month lock-up period.

In what was undoubtedly the biggest IPO of 2012, Facebook also hit the market this year and quickly tested and later broke its IPO support price of $38 per share. Four months later, Facebook’s shares hit a post-IPO low of $17.55 marking a decline of 54%.

Will Ivanplats follow the path of Facebook? Are these heavily-hyped IPOs simply too big to succeed?

As part of the transaction, Ivanplats said roughly $165 million in debt will be converted into about 40.6 million shares at the offering price. Plus, the company has more than 22 million options outstanding that are all in the money at this time.

Ivanplats $300 million IPO hardly compares to Facebook’s $16 billion IPO but both were the single largest IPOs for their respective exchanges in 2012. And, both were comparatively large liquidity events for their respective markets – Ivanplats IPO has already accounted for $67 million in shares trading hands.

Facebook’s IPO debacle on Nasdaq is now a part of history. A history, I’m sure, that Ivanplats would very much like to avoid.

Mike Luft

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