Post-IPO: Kraton Trades Up, Crimson Trades Down

NEW YORK (Reuters) – Two private equity-backed companies faced a cool reception on Wall Street on Thursday, as investors held steady in one but pulled out of the other.

Shares of Kraton Performance Polymers Inc (KRA.N), which makes compounds used in everything from disposable diapers to razor blades, opened at $13.50 on the New York Stock Exchange, matching the initial public offering price, and held steady in midday trade.

Shares of Crimson Exploration Inc (CXPO.O), a natural gas and crude oil prospector, traded down in a larger-than-expected float. Crimson sold 20 million shares on Wednesday for $5 apiece. It had originally planned to sell 18 million shares for between $6 and $8.

Many IPOs have struggled in the past two weeks as investors lock in profits and hesitate to buy into deals they perceive as risky. Those that trade up have not shown the historic 10 to 12 percent first-day jumps. Crimson is also at a difficult point in its business because while it says it has future prospects, many of its
current wells are reaching maturity, said Nick Einhorn, a research analyst at Connecticut-based Renaissance Capital.

“It’s certainly not a company that is going to have great results in the near future,” he said. “Investors are favorable on companies with strong growth potential.”

Crimson, which acquires and develops natural gas and crude oil properties, currently has operations in some of the hottest areas in the energy industry, including the U.S. Gulf Coast, south and east Texas, Colorado and southwest Louisiana. The company reported operating revenue of $86.3 million in the nine months that ended Sept. 30, down 43.2 percent from $151.8 million a year ago due to decreased prices and lowered
production. The company’s net loss was $16.8 million compared with a $25.3 million profit a year ago.

Crimson said it would use its share of the proceeds to repay debt. The company’s principal stockholder Oaktree Holdings, an affiliate of Oaktree Capital Management LLC, is converting its preferred stock into common stock and will have about a 31 percent stake in the company after the offering.

Shares of the Texas-based company closed down 17.12 percent at $4.31 on the Nasdaq. Another oil company, independent prospector Cobalt International Energy Inc, dipped as much as 7.4 percent in its
Wednesday debut before ending exactly where it priced.

Kraton, which also debuted on Thursday, raised about $139 million in its IPO. It said in a regulatory filing that it plans to use proceeds from its IPO to repay a portion of its senior secured credit facility and for general corporate purposes. Kraton is indirectly owned by units of private equity firm TPG Capital LP and JP Morgan Chase & Co’s private equity firm.

It posted a 27.9 percent loss in operating revenue to $717.3 million in the nine months ended Sept. 30, and net income of $1.2 million, down 96.6 percent from a year ago. Shares closed up 0.1 percent at $13.51 on the New York Stock Exchange. Kraton’s underwriters were led by Credit Suisse and Bank of America Merrill Lynch. The Crimson offering was led by Barclays Capital and Credit Suisse.

(Reporting by Clare Baldwin, editing by Matthew Lewis, Bernard Orr)