KLR Energy Acquisition Corp (KLREU.O) delayed the pricing of its $130 million initial public offering on Thursday, dampening hopes that special purpose acquisition companies (SPACs) focusing on buying distressed energy assets could warm up an IPO market frozen by persistent market volatility.
The postponement came one day after the successful stock market debut of another U.S. energy investment company, Silver Run Acquisition Corp SRAQU.O, which proved a hit with investors who see rich pickings in oil and gas assets up for sale amid the sector’s downturn.
In this year’s biggest IPO to date, Silver Run raised $450 million this week, $50 million more than it originally planned, to buy energy assets.
Despite that success, KLR’s IPO will not price on Thursday as originally scheduled, a person familiar with the matter said, without providing the reason or a new IPO date. The source asked not to be identified because the decision is not yet public. KLR declined to comment.
This year’s stock market jitters have thwarted the launch of many IPOs amid concerns over these valuations. SPACs have no earnings or revenue when they IPO, making them less vulnerable to speculation over their value.
However, SPACs represent bets by investors on the ability of their chief executives to identify cheap assets and boost their value through operational improvement. Silver Run had been praised for tapping one of the industry’s most talented executives, Mark Papa.
“If anyone can do it, (Papa) is probably one of the few,” said Carin Dehne-Kiley, an energy analyst at Standard & Poor’s. “It’s not just about being a CEO, it’s about being a very good CEO.”
Papa made his name by transforming Enron offshoot EOG Resources Inc into one of the biggest U.S. oil companies. He is also a partner of Riverstone Holdings LLC, one of the world’s largest energy-focused private equity firms.
KLR Energy Acquisition Corp is led by Gary Hanna, a well-respected 30-year energy sector veteran who has not worked at companies as big as Papa’s. He was previously CEO for five years of U.S. exploration and production company EPL Oil & Gas Inc, where he oversaw a number of acquisitions.
Houston, Texas-based KLR plans to use the money it raises in the IPO to acquire or merge oil and gas companies valued between $400 million and $1 billion, including debt, in the United States, according to its IPO prospectus.
(Reporting by Lauren Hirsch in New York; Editing by Bill Rigby)