Capital Markets

The Drive to Go Public Stays Idled

KKR delays its plans until next year, while AMC drops its IPO designs altogether. Biotechs back away, too.
Stephen TaubNovember 3, 2008

Even as commercial paper and the corporate bond market begin to thaw, new-equity issues remain frozen solid. The latest frosty signs: the delay of plans by private equity giant KKR to go public, and AMC Entertainment Holdings’ withdrawal of initial public offering plans.

KKR, run by Henry Kravis and George R. Roberts, now says it won’t complete the transaction designed to take it public until next year, according to Bloomberg News. The plans, calling for KKR to go public by purchasing KKR Private Equity Investors, L.P., which is currently traded on Euronext Amsterdam, first were announced in July.

“Investors are shunning all risk right now,” Ben Hauzenberger, who helps oversee about $51 billion at Swisscanto Asset Management AG in Zurich, told the wire service. It didn’t help that on Monday, KKR Private Equity Investors reported that it wrote down the value of 10 different investments.

“Some of our investments faced reduced valuations during the third quarter as a result of the extraordinary turbulence in the global capital markets,” said KKR co-founder George Roberts, who also is co-chair KKR Private Equity’s Managing Partner’s board. “We are redoubling our already extensive efforts to improve the operations of our companies in anticipation of a weaker economic environment. The vast majority of our companies continue to perform well-growing revenues, growing EBITDA, increasing margins and paying down debt — due to our continuous focus on long term value creation.”

Meanwhile, AMC’s regulatory filing on Friday gave no reason for withdrawing its IPO plans.

According to Reuters, a company spokeswoman said the company’s board of directors had decided “it was best to suspend” the offering under current conditions, but it would not say whether the company intended to try again once market conditions improve.

By the wire service’s count, 81 IPOs have now been withdrawn in the U.S. in 2008. And , in fact, there has not been a single IPO in nearly three months, the longest stretch in decades, it calculated.

A separate Reuters story, meanwhile, pointed out that one industry that could be especially hurt by the shutdown of the IPO market is biotechnology, once one of the most popular among investors. It noted that in the past two weeks alone, nearly half of biotech companies in the IPO pipeline have dropped out.

The dropouts include drug delivery company CyDex Pharmaceuticals Inc.; Xanodyne Pharmaceuticals, which focuses pain management; and Phenomix Corp., which specializes in diabetes treatments.

“We’re in a period where small cap names are not attractive,” Eric Schmidt, a biotechnology analyst at Cowen & Co. told Reuters.

The wire service noted that five biotech companies remain in the pipeline, with deals totaling $330.5 million. They include Omeros Corp., which works on central nervous system disorders and hopes to raise $115 million, and genomics analysis firm BioTrove Inc., aiming for a $75 million IPO.