How Charlotte-area IPOs fared one-year later

Last fall, three Charlotte-area companies made their stock market debut, joining a boom in U.S. companies issuing shares to investors.

A year later, health care company Premier and cable-maker CommScope Holding are trading above their initial public offering prices, but hotelier Extended Stay America fell below that mark after it announced third-quarter earnings this month that missed expectations.

CommScope is the leader among the three stocks, with its shares rising 41.3 percent. Both CommScope and Premier outperformed the S&P 500 index during the period their shares were trading.

U.S. companies have been rushing to go public amid a long-running bull market that until just recently had shown no signs of letting up. With more than 230 IPOs so far, 2014 is already the biggest year for IPOs since 2000, according to Thomson Reuters data.

Here’s a closer look at the three Charlotte-area companies and how they’ve fared since their IPOs.

CommScope Holding

Stock: Closed Friday at $21.20, up 41.3 percent from initial price of $15.

IPO date: Oct. 25, 2013.

Proceeds: $437.3 million.

What it does: Manufactures equipment used to build wired and wireless networks.

Year in review: Going public last year wasn’t a dramatic change for Hickory-based CommScope Holding, which had been a public company for nearly 15 years before being taken private in 2011 by the Carlyle Group private equity firm.

“It was a very smooth transition for us because we’ve been there before,” said Phil Armstrong, senior vice president for corporate finance.

While the company is perhaps best known as a broadband cable-maker, two-thirds of its sales now come from equipment used by major wireless companies, Armstrong said. The company, which employs 1,250 in North Carolina, expects that market to grow as its customers upgrade systems to keep up with increasing demand for wireless connectivity.

“We think we are in the early innings of that transition globally,” Armstrong said.

In the third quarter, the company’s sales rose 13 percent to $1 billion, and operating income increased 51 percent to $151 million from a year ago. Being a public company, though, has challenges, Armstrong said. For example, customer spending can vary during the year, affecting quarterly reports.

“There are some ebbs and flows,” he said. “Some operators may spend more in the first half of the year than the second half. There is always that challenge.”

CommScope used the proceeds of the IPO to pay down debt. Carlyle, which remains a 54 percent owner of the company, has sold some of its shares in follow-on stock offerings. The company is led by CEO Eddie Edwards, who received total compensation of $4.9 million in 2013.

Premier

Stock: Closed Friday at $33.05, up 22.4 percent from initial price of $27.

IPO date: Sept. 26, 2013.

IPO proceeds: $821.7 million.

What it does: Provides purchasing and performance-improvement services to an alliance of 3,400 hospitals.

Year in review: Since going public, Charlotte-based Premier has been on a buying spree, snapping up four companies. CEO Susan DeVore is likely to make more deals.

“We look for gaps in our current capabilities,” DeVore said in an interview. “We are adding companies that add technology, that have really talented people and that can be integrated into all of our other capabilities.”

In addition to acquisitions, the company has used IPO proceeds to build up its own technology operations and added compliance and other capabilities needed at a public company, she said.

On Nov. 10, Premier, which employs 842 in Charlotte, said profits in its fiscal first quarter ended Sept. 30 fell 42 percent but reiterated its expectations for double-digit revenue growth this year.

“We are pleased with our performance in the first year,” DeVore said. “I can’t worry about the stock price every day and the fluctuations with the market every day. We have delivered consistent results, and we have delivered to the expectations that the market had and that we set.”

Employees were able to invest in the company’s shares ahead of the IPO, and some are eligible for a stock program going forward. DeVore’s $24.9 million in total compensation for the fiscal year ended June 30, disclosed in a proxy filing last month, included $13.2 million in restricted stock awards and $9.2 million in option awards connected to the IPO.

Counting those awards, DeVore’s total compensation would have topped the Observer’s most recent list of highest-paid North Carolina CEOs. But there’s no guarantee the stock grants, which include performance requirements, will ever be earned or that the value of the options will ever be realized, the proxy notes.

“It’s the first year of a long journey and a long-term commitment to disrupting the status quo in health care and driving the industry to be more cost-effective and to be high quality,” DeVore said of the IPO. “The capital we raised in the IPO helped us do that, helps us do that faster.”

Extended Stay America

Stock: Closed Friday at $18.42, down 7.9 percent from initial price of $20.

IPO date: Nov. 13, 2013.

Proceeds: $531.1 million.

What it does: Operates 682 hotels in the U.S. and Canada, with a focus on customers traveling for business, looking for temporary housing or needing other longer-term stays.

Year in review: For Charlotte-based Extended Stay America, last November’s IPO was a bright spot for a company with a tumultuous corporate history.

Extended Stay went private in 2004 when it was bought by the Blackstone Group private equity firm. The company was then sold in 2007 to a real estate firm for $8 billion but filed for bankruptcy two years later under a heavy debt load. A group of private equity firms, including Blackstone, bought the company out of bankruptcy in 2010.

Extended Stay’s shares had been in positive territory since the IPO before falling 21 percent on Nov. 7, when the company missed analyst estimates for third-quarter earnings. Net income increased 29 percent from a year ago to $60.2 million, but expenses increased, and operating margins fell.

“The transition to being a publicly traded company has been challenging at times, but our early successes have given us the confidence to move forward with revenue-enhancing renovations at a faster rate than we previously planned,” the company said in a statement.

Extended Stay is led by former Starbucks CEO Jim Donald, who received $1.4 million in total compensation in 2013.

This story was originally published November 14, 2014 at 5:46 PM with the headline "How Charlotte-area IPOs fared one-year later."