U.S. security company ADT Corp (ADT.N), owned by private equity firm Apollo Global Management LLC (APO.N), said on Thursday its initial public offering (IPO) was priced well below its expected range, signaling investors are being picky about new offerings.
The IPO priced at $14 per share, compared to an original target range of $17-$19, cutting the maximum amount of funding the Boca Raton-based company could generate to $1.69 billion, roughly a quarter less than what would have been raised had shares been priced at the top of the range.
The $14 share price values the U.S’s largest provider of home security monitoring at around $10.5 billion, meaning it will be one of the biggest stock market listings of the year.
But with U.S. stocks trading at record highs, lifting the price of comparable companies against which IPOs are valued, investors are being selective.
One person familiar with the IPO said investors were skeptical about ADT, which has total debt of $10 billion, being positioned as a service-oriented business with high margins and strong cash flow.
Despite the weak price, Apollo still made a paper profit of around $2.4 billion, according to another person familiar with the deal.
The private equity fund, which has not yet sold any of its shares, bought ADT for roughly $7 billion in 2016 and merged it with Protection 1, a smaller U.S. peer it had previously acquired.
ADT started in 1874 as the American District Telegraph Co. It evolved into an alert box company and more recently has added on automation features that allow home video surveillance and remote locking and unlocking of doors.
The company had said it would sell 111.11 million shares to pay down debt, with the underwriting banks also having the option to buy an extra 16.67 million shares.
It ended up selling an initial 105 million shares, with the underwriting banks having the chance to buy 15.75 million shares.
ADT is expected to start trading as a public company on Friday on the New York Stock Exchange under the symbol ADT.
Morgan Stanley, Goldman Sachs, Barclays, Deutsche Bank Securities and RBC Capital Markets were joint book-running managers for the IPO.