Investors shun EMG’s scaled-back Coronado IPO
Energy and Minerals Group is thought to be weighing up whether to continue with its IPO of Coronado Global Resources.
Energy and Minerals Group is thought to be weighing up whether to continue with its initial public offering of coal miner Coronado Global Resources after investor demand for stock came in below expectations, valuing the business at $3.85 billion.
Coronado priced its float at $4 per share, as first revealed by The Australian online yesterday, after scaling back the size of its equity raising to $770m. It means that based on those terms, private equity outfit EMG will only be selling down 20 per cent of the stock at a business equity value of $3.85bn.
The disappointing result came after much hype when the bookbuild was launched on Thursday, with suggestions that more than $1bn worth of demand had been locked in and that the IPO was on track to price at the mid point of its pricing range of $4 to $4.80 or higher. However, most of this came from international institutional investors and retail investors eager to ride the wave of the booming price of coking coal.
Australian institutions shunned the deal in the early stages as they remained uncomfortable paying about $4bn for the company that generated more than half of its earnings from the Curragh coking mine in Queensland that it bought from Wesfarmers last year for only $700m. It is thought that some Australian investors may have bought shares with the raise scaled back.
Advisers on the deal, including Goldman Sachs, Bell Potter, Credit Suisse and UBS, would have wanted the IPO to trade well once listed.
Viva Energy was the largest float this year and listed in July. Its shares sold for $2.50 and they are now trading at $2.15, shaving about $500m off its market value, now $4.3bn.
Compounding problems for Coronado was a sell-off in commodity stocks globally halfway through the bookbuild on Thursday night and institutional investors scaling back their orders.
EMG had initially planned to sell 30 per cent of the company, with expectations of raising between $1.16bn and $1.39bn with the value range of $3.8bn to $4.4bn.
Coronado owns four assets, including Curragh in Queensland and three metallurgical or coking coalmines in the US, including the Buchanan, Logan and Greenbrier mines in Virginia and West Virginia. Curragh in Queensland and the Buchanan complex in West Virginia are expected to contribute about 80 per cent to group production and more than 90 per cent to EBITDA in 2018.
Should the listing proceed, the company will start its life as a public entity on Tuesday.