SAN FRANCISCO—Shares of Freescale Semiconductor Holdings I Ltd. closed trading at $18.33 on the first day of its initial public offering (IPO) Thursday (May 26), up just 1.8 percent from the $18 per share price where it they opened. Shares of Freescale rose as high as $19.50, or 8 percent from the opening, before retreating shortly before mid day.
Beyer said the decision to lower the share price was largely associated with market conditions. "The overall sentiment in equity markets had been less robust," Beyer said. "You price it in accordance with the overall market."
But Beyer noted that the stock price had risen from the opening (at the time of the interview, Freescale's share price hovered at around $19). Though lowering the initial price to $18 means Freescale hopes to net about $783 million to use to pay off debt—less than the up to $1.04 billion the company had said it hoped to pull in earlier this month—Beyer said it was largely irrelevant what the opening price was, as long as it ascended from there.
"The fact of the matter is that we want to create shareholder value," Beyer said. "What's important is where the stock is going to go to."
Freescale's IPO doesn't close until June 1.
Despite the sentiment among some that the market for Freescale's IPO was soft and the feeling of some analysts that it was bad timing for an IPO, Beyer said Freescale did not considered postponing the offering. "We never really felt that this was a bad time," Beyer said. "The price did change, over time. But the fact of the matter is that we've had a very successful IPO, bringing in almost $800 million in cash to help pay down our debt."
Several analysts have suggested that Freescale lowering its opening share price was indicative of a diminished appetite among investors for semiconductor stocks compared to less capital-intensive Web 2.0 companies. Last week, LinkedIn Corp. launched its IPO at $45 per share, and investors quickly bid up the stock to more than $120, though the price has since rescinded to about $95 per share.
But Beyer disagreed, saying that the highly successful IPOs of LinkedIn and Russian search engine Yandex NV—which rose 55 percent in its IPO Wednesday—reflect the way investors view social media companies in comparison with all other companies, not just chip firms.
"I would put LinkedIn and Yandex in a different class," Beyer said. "If you consider social networking, there are so few companies in that industry. Investors are looking at them very differently than they are all other companies. "
One thing that justifies valuation (remember: it is all about future potential!) of FreeScale it is doing right things in some areas of its product portfolios. For example, just in last year alone, they have shipped more Sensor products that what they did (in that segment) in the 25 years prior!
Dr. MP Divakar
Agree, not sure how the $7.5B dollars of debt and limited cash reserve will play into the equation for stock pricing with a company that has essentially been on life support in terms of manufacturing. The reality now is Freescale will need to have financial transparency to the market. In addition, post the buyout in 2006, all the executives left the company after the payout. Hope this is not a trend in 6 months when they can exercise their options.
No, simply put, 22-24 was too expensive for the state of the affairs that FSL is in. And investment banks knew it. I mean too expensive compared to peers (like NXP or TXN). The first day attracted day traders hoping for a quick gain like LNKD. And we saw at the close that the demand was thin and the sellers pushed down the price.
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