Grand Canyon Breaks IPO Drought, Prices Low

NEW YORK (Reuters) – Grand Canyon Education Inc. (LOPE.O: Quote, Profile, Research, Stock Buzz) shares priced at $12 on Wednesday in the company’s initial price offering, at the lower end of its estimated price range, an underwriter said.

The pricing broke a nearly 15-week slump without an IPO in the United States, the longest in decades.

The Phoenix, Arizona-based on-line university operator sold 10.5 million shares, for total proceeds of $126 million.

The company twice lowered its estimated price range prior to the IPO, including on Wednesday morning when it reduced it to between $12 to $14, from between $16 and $18.

“The falling price estimate range was a tell-tale sign of low demand for Grand Canyon’s IPO,” said Scott Sweet, a senior managing director with advisory firm IPO Boutique.”

He added: “The pricing at this range gives this IPO a shot at success, but if anyone’s interested in education, they can choose Apollo (APOL.O: Quote, Profile, Research, Stock Buzz) and Capella Education (CPLA.O: Quote, Profile, Research, Stock Buzz),” referring to two direct competitors, whose valuation multiples he said are lower than that implied by the $12 price and which enjoy substantial analyst coverage.

About 75 percent of the proceeds of the offering will be used for a special distribution to existing shareholders, according to a regulatory filing.

The last IPO in the United States had been by Texas-based Web hosting company Rackspace Hosting Inc (RAX.N: Quote, Profile, Research, Stock Buzz). Since then 29 companies have canceled or postponed their initial offerings, according to Thomson Reuters data, as markets have been volatile.

Sweet said the slow IPO market had forced Grand Canyon to lower its expectations. “In the right environment, Grand Canyon would have seen far more demand, and priced higher, but in this environment, it’s a mild success that they even got the deal out.”

Grand Canyon, which was founded in 1949 and became a for-profit institution in 2004, provides on-line post-secondary programs primarily serving working adults.

As of late September, the company had an enrollment of 22,000 students, according to the filing. For the nine months ended on Sept. 30, the company had net revenues of $109.6 million and operating income of $9 million.

The IPO’s underwriters, led by Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) and Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz) have the option to purchase up to 1.575 million additional shares of common stock to cover over-allotments of shares.

The company plans to begin trading its stock Thursday on the Nasdaq Global Market under the symbol “LOPE.”

(Reporting by Phil Wahba; Editing by Bernard Orr, Gary Hill)