IPO Boutique Comments on New Fortress LLC (NFE)

 

Company: New Fortress Energy LLC
Symbol: NFE
Description: They are an integrated gas-to-power company that seeks to use “stranded” natural gas to satisfy the world’s large and growing power needs.
Shares: 22.2 million
Price Range: $17.00-$19.00
Trade Date: 1/25 (or later if Government Shutdown continues)
Underwriter(s): Morgan Stanley, Barclays, Citigroup, Credit Suisse
Co-Manager(s): Evercore ISI, Allen & Co., JMP Securities, Stifel
Terms Added 1-14-19

1.22.19, 9:45am ET — New Fortress Energy LLC (NFE) — Channel checks just completed, are currently revealing, that the IPO needs work in both the institutional and retail books. The company is “new” to the LNG (liquified natural gas) scene compared to legacy companies it competes against. The company reported a loss of $43.4m  in the first nine months of $2018 (larger loss than in that period in 2017) and revenue increased just 12.3% from a year ago while still seeking a $3.05bn market cap if the offering did price at the midpoint of the range. This IPO’s sponsor, Fortress, is one that is known for not being “buyer friendly” and given the financials of the deal, we think this negatively skews the risk-reward prospects of this deal. There are other sponsor backed that are much more “friendly” in pricing including KKR, Blackstone and Carlyle Group.

It is our opinion that there may be better plays in the space [i.e. Cheniere Energy (LNG)] on the short term but if inclined to be involved in the space, we feel a long term approach is one that should be taken.

As it pertains to the government shutdown…roadshows are ongoing but we are hearing from our sources that attendance is currently not strong because of the possibility this deal will not debut due to the SEC not being able to declare the offering “effective”. Please monitor for potential information. Rating = 2. 

1.23.19, 10:35am ET — New Fortress Energy LLC (NFE) — Channel checks just completed, are currently revealing, that the IPO is still in need of orders. The underwriter states that the books are “scheduled” to close Thursday at noon.  The deal has many cross-currents  due to the government shutdown  which is resulting in signficant pushback. Here is the latest:

• The underwriters and company are set to agree on a price Thursday night.
• An amended S-1 will then  be filed changing the transaction to a “fixed price”.
• The deal will be come effective when the government opens or 20-days post the fixed price — whichever happens first.

This is obviously highly-unusual given the circumstances. This does not take into account the company being in the LNG sector that has been subjected to volatility and this entity is virtually a startup. We also standby our comments from Tuesday surrounding the financials and large market cap target ($3.05bn at the midpoint of the range) that the company is seeking. We think this IPO has a negative risk-reward profile in the short term. Rating = 2. 

1.24.19, 9:55am ET — New Fortress Energy LLC (NFE) — Channel checks just completed, are currently revealing, that the IPO is “oversubscribed”. The underwriters are currently guiding pricing to the low-end and below the prevailing $17-$19 range. The books will close at noon today (1/24). The underwriter state that a “proposed pricing” will be communicated to key investors in the afternoon and an amendment will file late this evening with a “fixed price” (as we outlined in Wednesday’s message). The underwriter states that there will be “soft allocations” but nothing can be confirmed until 20-days post the amendment (fixed price) or if the government opens — whichever happens first.  If the government does not re-open, the offering would be effective 2/13. Our opinion, and that of our sources, remain the same in that the deal has far too many “moving parts”. The volatility and economic outlook has changed immensely from late December to early January and we do not feel it would be prudent to “forecast” where the sector or the broader market “might be” in mid February. 2019 is a year that is forecasted to have a handful of large deals (especially highly-publicized tech deals)…missing this one given the current situation is a “risk” we are willing to take. Rating = 2. 

1.25.19, 9:15am ET — New Fortress Energy LLC (NFE) — According to underwriter guidance, the company is expected to file an amendment with the SEC “sometime today”. We assume that a fixed price will be placed on the offering and the clock will then begin on the 20-days for the deal to become effective. We will update the client base when more information becomes available. Rating = 2. 

1.25.19, 10:30am ET — New Fortress Energy LLC (NFE) — Further channel checks just completed, according to underwriter guidance, the company is expecting to restructure the deal when an amendment is to be filed “likely’ sometime today. The deal is to be downsized from 22.2mm shares to 20.0mm shares and price at $15.00 or $2.00 below the prevailing $17-$19 range. The clock will then begin on the 20-days needed for the deal to become automatically effective. If the amendment comes today… the trade date would be on February 14th. Rating = 2. 

1.29.19, 8:30am ET — New Fortress Energy LLC (NFE) — According to underwriter guidance, this IPO is targeting Thursday, January 31st, as its debut date. The terms remain the same — 20.0mm at $15.00. Rating = 2.

1/30/19 – 6:55pm ET – New Fortress Energy LLC (NFE) priced 20.0mm shares at $14.00 and will debut on Thursday (1/31).

1/31/19 – 10:30am ET – New Fortress Energy LLC (NFE) priced 20.0mm shares at$14.00 and opened at $13.25 for a loss of 5.4% at first trade.