In more ways than one, the IPO market isn’t quite what it was a decade or two ago. The proportion of U.S. companies choosing to go public has been steadily declining for more than two decades now, with startups often choosing to sell to bigger companies or stay private. Many observers have squarely blamed this unfortunate trend on increased bureaucracy, including increased regulatory and disclosure costs. Indeed, the number of public companies listed on US stock exchanges has reduced by nearly 50% since its peak in 1996, despite a dramatic increase overall market capitalization.
This trend does not seem to be abating, the number of new filings in the IPO market downward trend for most of 2022.
That said, the energy sector turns out to be a different beast. Bloomberg reported that four energy companies have filed for IPOs in the current month, effectively July 2019 for the most in over five years.
Here’s a look at this month’s deposits:
- MN8 Energy Inc–MN8 Energy, Inc. (MNX) operates as a renewable energy company and offers solar power generation and storage solutions. MN8 Energy serves customers in the United States. hMN8 Energy has filed to raise $100 million in an IPO of its common stock, according to an S-1 registration statement.
- Solarjuice Co Ltd—Solarjuice Co., Ltd (SJA) distributes renewable energy equipment. The company offers photovoltaic solar panels, inverters, components and complete solar systems. Solarjuice serves customers in Australia. Solarjuice has applied to raise an undisclosed amount in an IPO of its common stock, according to an F-1 registration statement.
- ASP Isotopes Inc—ASP Isotopes Inc (ASPI) operates a pre-commercial advanced materials business. The company is focused on the production of high-value, low-volume isotopes for the medical, nuclear and other industries. ASP Isotopes serves customers worldwide. ASP Isotopes has applied for $30 million in funding in an IPO of its common stock, according to an S-1 registration statement.
- Trio Petroleum Corp.—Trio Petroleum Corp (TPET) is an oil and gas exploration company with leasehold interests in Monterey County, California. Trio Petroleum Corp. has filed a request to raise an undisclosed amount in connection with an IPO of its common stock, according to an S-1 registration statement.
The few energy companies that have signed up so far this year have been mixed. Manufacturer of energy storage systems NeoVolta Inc. (NASDAQ: NEOV) saw its shares drop 13% on its first day as a public company. However, the shares managed to rally and are currently trading 23% above the IPO price.
Shares of excel energy (NYSE:EE), an LNG solutions provider, climbed 12% on IPO day but fell back and is currently trading just 1.9% above the IPO price .
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ProFrac Holding Corp. (NASDAQ: PFHC) is a vertically integrated energy services company that operates through three segments: stimulation services, manufacturing and proppant production. The company went public on May 13, 2022 but failed to capture the imagination of the investor universe. Shares of PFHC closed just 0.6% above their offer price on Day 1, but have since slipped 5.9%.
Oil & Gas Mergers & Acquisitions
MKM Holdings LLC analyst Leo Mariani told Bloomberg that despite setting records, energy IPOs are still rare, mainly because private companies choose to sell to larger competitors, instead of becoming public themselves. He also noted that oil and gas producers are still heavily discounted, making new IPOs less attractive than buyouts.
Indeed, the energy analysis company Enervous reported that transactions by private equity firms have seen a significant increase as they have purchased assets that oil companies considered non-essential to their development plans. These assets tended to be outside of oil-prolific areas like the Permian Basin of West Texas and New Mexico.
“Private equity still has some dry powder for deals. They use it to target assets labeled as non-core by public companies. Once you get out of the heart of the Permian Basin and a few other key areas, the competition for bids lessens, and these positions are often available at buyer-friendly prices,remarked Dittmar.
Additionally, private equity is turning to a lender of last resort for fossil fuel companies. As companies like GS have cut funding for fossil fuels, the massive private equity industry is happily taking their place. According to a recent analysis from the Private Equity Stakeholder Project and the Americans for Financial Reform Education Fund (AFREF), the eight largest buyout firms have invested nearly as much money in coal, oil and gas as the big bank.
According to nonprofit groups, private equity firms, which include Global Apollo Management, Blackstone Group, Brookfield Asset Management, Carlyle Group, KKR and Pincus Warbugcollectively oversee $216 billion in fossil fuel assets, on par with the amount of money big banks invested in fossil fuels last year.
Another surprising finding: the 10 largest private equity funds have 80% of their energy investments in fossil fuels.
“The billions of dollars that private equity firms have deployed to drill, fracture, transport, store, refine fossil fuels and generate energy, stands in stark contrast to what climate scientists and international policymakers have called to align our trajectory. on the 1.5 degree Celsius warming scenario“, declares a report co-signed by major climate groups including Greenpeace, Natural Resources Defense Project, Sierra Club and Sunrise Project.
By Alex Kimani for Oilprice.com
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