Private Equity IPO Class of 2011: No Love For Rich Old Men (RATE, FSL, HCA, BAC, KKR, KMI, GS, VHS, BX, MTGE, ACAS, AMTG, APO, VNO, DOW)

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The 2011 Class of Private Equity-Backed IPOs is really off to a rough start.  The market conditions of late have all culminated to create a cautious IPO environment and even a cautious private equity environment.  We have reviewed some of the key 2011 private equity-backed IPOs (and some which emulate private equity) for their performance and we have also reviewed some of the top pending deals that are waiting in the halls for the IPO market to get a bit better.

What private equity firms have to fight is two things.  First, no one wants to just hand money over to old rich men who buy a company up, leverage the books up after paying handsome dividends, and then who expect to sell it back to the Joe Public later.  The second issue is that the IPO climate still mostly demands solid companies that have clean books and clean structures (except for the Web 2.0 winners of late).

Bankrate Inc. (NYSE: RATE) has actually only of late come under selling pressure after its $15.00 per share in the IPO originally fell but then ran up to $1850 and higher before the end of July market tank took the wind out of the sails.  Some investors have probably been hoping for more of a bounce and shares are currently at $15.50.  This one isn’t broken, but it is pressured.

Freescale Semiconductor Inc. (NYSE: FSL) may have gotten a boost from the old Motorola ties, but it has still been considered FREEFALL as some former employees called it.  The IPO was at $18.00 and shares are now around $13.80 after having hit a low under $10.00.

HCA Inc. (NYSE: HCA) was the largest of the private equity offerings at $30.00 but it has since already warned (like it couldn’t have known elective surgeries were running soft) and now that reimbursement rates from Medicare and Medicaid are either being cut or are feared to be under review.  Bain Capital, Kohlberg Kravis Roberts & Co. (NYSE: KKR), and Bank of America Corporation (NYSE: BAC) via BAML Capital Partners, and founder Dr. Thomas First, Jr. were all behind it.

Kinder Morgan, Inc. (NYSE: KMI) priced 95.5 million shares at $30.00 and rose initially before selling off.  The company is under the great Richard Kinder and seems to just be sorting itself out right now.  Goldman Sachs Group Inc. (NYSE: GS) is part owner as well.  Another issues is that it sold more shares at a higher price than originally scheduled.

Vanguard Health Systems, Inc. (NYSE: VHS) sold 28.75 million shares (after the overallotment option) in total at $18.00 per share at the end of June from parent Blackstone Group LP (NYSE: BX).  The market and the woes of Medicaid and Medicare took a big bite and after falling as low as about $12.00 the stock is back up to $14.25.  Still a broken deal.

TWO MORTGAGE DEALS…

American Capital Mortgage Investment Corp. (NASDAQ: MTGE) is a start-up mortgage REIT that was launched just on August 3 under parent American Capital, Ltd. (NASDAQ: ACAS).   The company priced at $20.00 per share for total gross proceeds of $160 million and American Capital agreed to buy 2 million shares for $40 million at the initial public offering price in a private placement. This one opened weak, but it has responded with the market bounce and shares are back up to $19.50.  That is still a busted deal but better than it was.