Bridgepoint Education Prices Low IPO

NEW YORK (Reuters) – Bridgepoint Education Inc, an operator of online and campus universities, became the third U.S. company to go public this year, but priced its deal 30 percent below the midpoint of its estimate range of $14 to $16, a source with knowledge of the deal said on Tuesday.

San Diego-based Bridgepoint sold 13.5 million shares for $10.50 each, raising $141.75 million, the source said, far less than the company’s original estimate that the IPO could raise as much as $216 million.

The deal’s structure, in which most of the shares were sold by an existing shareholder with very little money going to the company, and a recent drop in the stocks of Bridgepoint’s rivals caused the deal to be priced less than expected, an analyst said.

“There are two reasons that I see derailed an offer whose numbers at first glance looked outstanding. First, the amount of insider selling, and second the stocks of the comparables have fallen,” said Scott Sweet, senior managing director with research firm IPO Boutique.

About 81 percent of the shares being sold are held by private equity firm Warburg Pincus.

Rivals Grand Canyon Education Inc (LOPE.O) and Apollo Group (APOL.O) have seen their shares drop about 22 percent and 30 percent, respectively, since their January highs.

Grand Canyon, which operates online universities and campuses in the Southwest and is Bridgepoint’s most direct publicly traded competitor, launched its own IPO in November, but also had to settle for less than its original estimate range, lowering the price range by $4 on the day of deal.

Enrollment and revenue at Bridgepoint grew by about 150 percent in the year ended Dec. 31, 2008, according to a regulatory filing, but questions as to whether the company can sustain that pace led investors to demand a lower price, an analyst said.

“They have taken low hanging fruit — those were small colleges,” said Francis Gaskins, president of research firm IPO Desktop, in reference to the schools Bridgepoint has acquired in recent years, including Ashford University in Clinton, Iowa, and University of the Rockies in Colorado Springs.

It may prove harder to acquire additional colleges to spur growth, and the online university industry is more competitive now, Gaskins added.

As of Dec. 31, 2008, Bridgepoint student enrollment was 31,558, with revenue of $218.3 million, and it offered about 44 degree programs with 55 specializations, according to a filing.

Bridgepoint is the third IPO so far in 2009, following the $828 million deal in February by pediatrics nutrition maker Mead Johnson Nutrition Co (MJN.N) and the $120 million IPO in early April by Chinese video game maker Changyou.com Ltd (CYOU.O).

Both deals priced at the top of their estimate ranges and rose by 10 percent and 25 percent, respectively, in their trading debuts.

Bridgepoint IPO’s underwriters, led by Credit Suisse (CSGN.VX) and JP Morgan (JPM.N), have the option to buy up to 2.025 million additional shares to cover over-allotments.

The company plans to list on the New York Stock Exchange under the symbol “BPI” and begin trading Wednesday. (Reporting by Phil Wahba; Editing Bernard Orr)