IPO Watch: GT Solar
www.gtsolar.com
(Nasdaq:SOLR)
Scheduled for week of July 21
$500 million estimated proceeds
$2432 million estimated post-money valuation
I’m starting to think that solar power deals are on par with special-purpose acquisition companies (or SPACs) and dry bulk shipping this year. After all, there have been two others to date: Real Goods Solar (Nasdaq:RSOL), which raised $55 million in May, and ReneSola (NYSE:SOL), which brought in $130 million in January. In a year with only 35 IPOs, that makes solar power a bona fide hot spot.
GT Solar makes equipment used to fabricate photovoltaic cells, which collect sunlight and convert it into electricity. These are big machines needed to produce solar cells but sold to only a handful of buyers worldwide. For the fiscal year ended March 31, 2008, 62% of the company’s revenue came from just one customer. In years past, the customer base has been more diversified, but just barely. In fiscal 2007, for example, three customers contributed 70% of revenue. No matter how big the solar power industry becomes, GT Solar will always face a concentrated customer base. A good analogy is semiconductors, which are in everything these days but are fabricated by just a few companies.
The company made $36.1 million in net income on $244.1 million in revenue for the March 31, 2008 fiscal year, its first profit ever. The year before, it had a net loss of $18.4 million on revenue of $60.1 million. The outlook for fiscal 2009 is good; the company has an order backlog of about $1.3 billion and deferred revenue from equipment shipped but not yet billed of $164.2 million. Profits should stay strong as long as revenue stays high. GT Solar’s business has high fixed costs that may cause profits to swing from year to year as customer demand changes.
The problem? Despite the market opportunity, none of the proceeds from this deal are going to the company. Instead, they are going to GT Solar Holdings, an investment partnership that acquired the company in 2006. GT Solar will own 78.3% of the company after the deal closes. Net cash flow from operations is positive and has been for several years, so it’s not like the company needs the cash. But in this stock market and given the potential growth of solar power, why sell now?
Upcoming IPOs:
First Class Navigation (NYSE:FNV.U); scheduled for week of July 7; $125 million estimated proceeds; $156.3 million estimated post-money valuation: Guess what? It’s another shipping SPAC! This special purpose acquisition company is raising money to make an unspecified future acquisition in the ocean shipping industry, which is a hot business these days because China and India need everything, it seems, while the rest of the world wants cheap goods made in China and India. First Fleet Navigation has been organized to make acquisitions in the ocean shipping business. The company’s management team has extensive experience in the shipping industry. The big risk seems to be that First Class Navigation will find itself in a bidding war with Navios Maritime Acquisition (NYSE:NNA), another shipping SPAC I wrote about recently that raised $220 million in an IPO priced on June 25.
I’m now dreaming of a SPAC that rolls up all the IPO trends by specializing in solar-powered dry-bulk shipping. Which investment bank will make my dream come true?
