Energy Business

Smart Sand IPO Debut Underwhelms

Chris Lange

Smart Sand Inc. (NASDAQ: SND) entered the market on Friday in its initial public offering (IPO). The company priced its 10.62 million shares at $11 per share, below the expected pricing range of $15 to $18 per share, with an overallotment option for an additional 1.59 million shares. At this price, the entire offering is valued up to $134.31 million.

The underwriters for the offering are Credit Suisse, Goldman Sachs, Jefferies, Simmons, Tudor Pickering Holt and Deutsche Bank.

This company is a pure-play, low-cost producer of high-quality Northern White raw frac sand, which is a preferred proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells.

Smart Sand sells its products primarily to oil and natural gas exploration and production companies, such as EOG Resources, and oilfield service companies, such as Weatherford, under a combination of long-term take-or-pay contracts and spot sales in the open market.

In the filing, the company detailed its financial position as follows:

For the year ended December 31, 2015 and six months ended June 30, 2016, we generated net income (loss) of approximately $5.0 million and $(2.0) million, respectively, and Adjusted EBITDA of approximately $23.9 million and $6.4 million, respectively.

The company intends to use a portion of the net proceeds from this offering to redeem all of its outstanding preferred stock and to repay the outstanding indebtedness under its existing revolving credit facility. The remaining net proceeds will be used for general corporate purposes.

Shares of Smart Sand were last seen down 1.7% at $10.81, with a range of $10.30 to $10.90 on the day as of noon Eastern. Also nearly 2 million shares have moved on the day.