Digicel cancels IPO: Five key points behind the decision
MOBILE and communications firm Digicel has pulled its $1.8bn New York flotation plan at the 11th hour citing current market conditions. Here are five key points about the decision:
1. Stock market conditions: There were five flotations on Wall Street last week and in all cases, shares were sold at below the expected range. Digicel's target price per share was between $13 and $16 and the company was due to release the exact price details today.
2. Proceeds: Digicel had planned to use between $1.2bn and $1.3bn of the flotation proceeds to reduce down the company's debt. Last night, Digicel owner, businessman Denis O'Brien, said the company would continue to exploit business opportunities.
3. Timing: Despite Digicel having €6.5bn in gross debts, the company does not have any maturities until 2021. In addition, Mr O'Brien said Digicel is generating strong and growing free cash-flow.
4. Pricing: Essentially, the IPO had been predicated on achieving fair value for the company. Given recent discounted IPOs, the move, at this time, was seen as a less attractive route for the firm.
5: Future: Digicel could still float in the short to medium-term. There are also other ways to raise funds including rights issues or outright sale, although the latter is a less likely route.