Vanguard IPO Breaks Below $18 IPO Price But Blackstone Still Sitting Pretty

Not every IPO can be LinkedIn. Or HCA, apparently.

Today, shares of Vanguard Health Systems fell below their $18 IPO price. Nashville-based Vanguard sold 25 million shares at $18 each earlier this week via bookrunners BofA Merrill Lynch, Barclays Capital, Citi, Deutsche Bank Securities and JP Morgan. The underwriters have the option to buy an additional 3.75 million shares.

Vanguard’s stock yesterday stayed barely above water, closing at $18.05 a share. Today, Vanguard’s shares fell 24 cents, or 1.33%, to $17. 81 in afternoon trading. Volume was 1.26 million. With its stock below its $18 IPO price, Vanguard officially became a broken deal.

Founded in 1997, Vanguard operates around 26 hospitals in Arizona, Illinois, Michigan, Texas and Massachusetts. In the nine months ended March 31, Vanguard posted a net loss applicable to stockholders of $1 million on total revenue of $3.4 billion, my coworkers at Thomson Reuters said.

Vanguard’s underwhelming debut follows the relatively positive showing from HCA. In March, HCA raised $3.8 billion in its super-sized IPO. The HCA offering–the largest PE backed IPO ever– gained 3.4% during its first day. The company’s stock has stayed above its $30 IPO price (HCA shares today were trading at $33.22).

What does Vanguard’s performance thus far mean for Blackstone? Not all that much. Blackstone owns the largest stake of Vanguard. Before the IPO, the PE firm had 29.4 million shares, or about 66%, of Vanguard, according to SEC filings. This fell to 36.3% after the IPO (and including the Greenshoe). Blackstone didn’t sell any shares in the IPO; its stake is valued at about $524 million.

Morgan Stanley owned 7.7 million or 17.3% before the IPO. This fell to 10% after the offering (and including exercise of the greenshoe).

Blackstone, along with Vanguard’s other investors, has already made back its money. The investors have received roughly $747 million in dividends and distributions, according to SEC filings.

In 2004, Blackstone acquired Vanguard in a deal valued at $1.75 billion, a filing said. Morgan Stanley Capital Partners was the seller. Blackstone invested $494.4 million equity for a 66% stake in Vanguard. Morgan Stanley, which invested $130 million equity, took 17.4 percent. A group of 12 Vanguard execs also put in $85.7 million equity for an 11.4% stake, the filing said. In all, the investors put in $710 million of equity.

In January 2011, Vanguard paid a $447.2 million distribution to its shareholders. Vanguard also paid a $300 million distribution to shareholders in January 2010, according to regulatory filings.