In each case there are different assumptions that one can make about:
? the number of shares outstanding
? what earnings stream is used to determine P/E
? and a range of anticipated IPO pricing
I?ve included the data in a file here, so that you can look at the
prospectuses and perhaps calculate a value on what you believe
earnings will be in the future ? which is how Wall Street analysts
will value the firms.
IPO Valuations (Omnivorous-GA)
The Nymex S-1 was filed less than two weeks ago and has yet to be
updated significantly. It is linked below.
Nymex prospectus S-1 Registration Statement (Oct. 20, 2006)
The prospectus indicates that there are current 79,924,800 shares
outstanding but the IPO offers 6,484,800 shares on a delayed-delivery
basis ? 33.3% in six months; another one-third in one year; and the
final one-third in 18 months. So, Nymex starts with 79.9 million
shares and the number rises to at least 86.4 million shares over 18
Net income for the 12-months ending Dec. 31, 2005 was $71.1 million.
But a rolling 12-month number (unaudited) through June 30, 2006 was
There is a lot happening in these earnings ? including the Nymex
merger with Comex, which sparked this IPO. Also, part of the dramatic
growth was in the trading of energy futures and options, so you?ll
want to examine the prospectus carefully to fully value the company.
Finally, the anticipated IPO price: $48-$52, according to yesterday?s news reports:
Financial News Online
?Nymex to raise up to $360 from IPO,? (McCandless, Oct. 31, 2006)
In the case of Hertz, the initial S-1 was filed in July but has been
updated in the past week:
Hertz Global Holdings S-1 Registration Statement (updated Oct. 27, 2006)
Hertz indicates that 320,618,692 shares of common stock will be
outstanding after the IPO but there are also options on 15,833,354
shares of common stock at a weighted average exercise price of $6.96
per share and underwriters can also purchase up to 13,235,250 shares
in the 30-day period after the IPO.
So, there?s a base of 320.6 million shares but fully diluted there
could be as many as 349.7 million shares.
Income assumptions for Hertz are extremely tricky, as the company was
acquired in a private-equity transaction at the end of 2005 and
substantially recapitalized, with added debt,
acquisition and ?consulting fees?. In addition, preceding the IPO,
the current holders will be paid a $426.8 million dividend.
Nonetheless, the combined firm shows ADJUSTED income of $3.3 million
in FY2005. There?s a much larger income number for the combined firm
? but it would be critical to look at the adjustments in the pro forma
income statement because so much has changed in the capitalization and
expenses for the company. For the first six months of 2006 it shows a
loss of $33.3 million (vs. a $60.2 million loss for the first six
months of 2005). So, a rolling 12-month earnings statement would show
a net income of $30.2 million.
Finally, the offering price is expected to be $16-18, according to
news reports from last week:
?Hertz IPO could raise up to $1.8 bln,? (Oct. 27, 2006)
Using 2005 and the number of shares (fully diluted) 18 months from now
? along with the $52 per share number, we get:
Using 2006 pro forma results so far and the lower number of shares,
along with the lower offering price, the P/E drops to 33.3.
Using 2005 and the largest number of shares and an offering price of
$18, the earnings are $0.0094 cents per share ? a P/E of 1,907.
The earnings per share based on 12-month earnings through June 30,
2006 and the lowest level of 320.6 million shares is $0.094. So, IF
the offering price is only $16 per share, the P/E would be 154.
As always, if there are any questions about assumptions here, please
let me know via a Clarification Request.