ICO Global Communications (Holdings) Ltd. [ICOGF] added a further $690 million to its coffers through the sale of senior notes and an initial public stock offering (IPO), but the stock's $12 price per share fell well below expectations.
The targeted offering price of between $16 and $19 a share was intended to raise $380 million. Instead, ICO was forced to cut the number of shares it slated to offer in half and collect only $120 million, less than one-third of its goal. Only 10 million shares of the London-based company's stock were sold.
The underwriting of senior unsecured notes and warrants was led by Donaldson, Lufkin & Jenrette and Goldman, Sachs & Co. That financing consisted of $460 million in senior notes and warrants and $110 million in Euro senior notes and warrants that will be listed on the Luxembourg Stock Exchange.
...Poor Market Conditions, Iridium Blamed For Shortfall
ICO is not the first mobile satellite services (MSS) operator to suffer due to a weak IPO market. Last month, Orbcomm Global L.P. postponed its IPO because of tepid demand for new issues. Iridium LLC [IRIDF] also had to shelve its first attempted stock offering two years ago, before conditions improved and allowed a $240 million IPO in June, 1997.
"The decision to begin trading was made with market conditions in mind and industry conditions were less than ideal," said ICO spokesman Joe Tedino.
Iridium late last month announced that it had suffered two additional satellite failures and incurred problems with the delivery of its mobile phone handsets. ICO, another proposed global mobile satellite system, appears to have had the valuation of its stock hurt by its rival's woes.
ICO's prospectus originally described plans for a 20 million-share offering that would sell 16 million shares in the United States and Canada, and four million shares elsewhere. The downsized deal omitted the international offering, though an undisclosed, but "significant" amount of financing was raised in Europe.
The additional $690 million raised by ICO now places the company more than halfway toward its financing requirements. Prior to July 31, ICO had raised in excess of $2 billion toward its $4.6 billion goal.
The price of $12 per share holds down the value of the shares held by existing ICO investors. Hughes Telecommunications & Space Co. [GMH], for example, agreed to purchase eight million-plus shares of ICO for $11.11 a share back in 1995. The $12 a share price gives it virtually no gain, unlike the handsome profits it could have obtained with an offering priced in the intended range of $16-$19 a share.
ICO executives emphasized that the IPO was successfully completed and clearly demonstrated investors believe the company has potential.
"Investors have understood us and supported us, despite a general softness in stock market conditions," said Norman Lindsay, ICO's chief financial officer.