In more ways than one, the IPO market isn’t quite what it was a decade or two ago. The proportion of US companies choosing to go public has been steadily declining for more than two decades, with startups often choosing to sell to larger companies or remain private. Many observers have blamed this unfortunate trend squarely on increasing bureaucracy, including rising regulatory and disclosure costs. Indeed, the number of public companies listed on US stock exchanges has increased decreased by almost 50% since its peak in 1996, despite a dramatic increase aggregate market capitalization.
This trend does not appear to be weakening given the number of new registrations the IPO market trending down for most of 2022.
However, the energy sector is proving to be a different beast. Bloomberg has reported that four energy-sector companies have filed for IPOs this month, effectively tied to July 2019 for most in more than five years.
Here’s a rundown of this month’s submissions:
- MN8 Energy Inc–MN8 Energy, Inc. (MNX) is a renewable energy company offering solar energy generation and storage solutions. MN8 Energy serves customers in the United States. hMN8 Energy has applied to raise $100 million in an initial public offering of its common stock, according to an S-1 registration statement.
- solar juice co ltd—Solar Juice Co.,Ltd (SJA) sells systems for renewable energies. The company offers solar modules, inverters, components and complete solar systems. Solarjuice supplies customers in Australia. According to an F-1 registration statement, Solarjuice has applied to raise an undisclosed amount in an initial public offering of its common stock.
- ASP Isotopes Inc—ASP Isotopes Inc (ASPI) operates a pre-commercial stage advanced materials company. The Company is focused on the production of high value, low volume isotopes for the medical, nuclear and other industries. ASP Isotopes serves customers worldwide. ASP Isotopes has filed to raise $30 million through an initial public offering of its common stock, according to an S-1 registration statement.
- Trio Petroleum Corp.—Trio Petroleum Corp (TPET) is an oil and gas exploration company with leasehold interests in Monterey County, California. Trio Petroleum Corp. has requested, pursuant to an S-1 registration statement, to raise an undisclosed amount in an initial public offering of its common stock.
The handful of energy companies to go public so far this year have been mixed. Manufacturer of energy storage systems NeoVolta Inc. (NASDAQ:NEOV) saw its shares plunge 13% in its first day as a public company. However, the stock has managed to recover and is currently trading 23% above its IPO price.
shares of Excel Energy (NYSE: EE), an LNG solutions provider, was up 12% on the IPO day but has pulled back and is currently trading just 1.9% above the IPO price.
See Also: Oil Prices Are About To Reverse Course
ProFrac Holding Corp (NASDAQ: PFHC) is a vertically integrated energy services company that operates through three segments: Stimulation Services, Manufacturing and Proppant Production. The company went public on May 13, 2022, but failed to capture the imagination of the investment universe. PFHC shares closed just 0.6% above their bid price on the first day, but have since fallen 5.9%.
Oil and Gas M&A
MKM Holdings LLC analyst Leo Mariani told Bloomberg that energy IPOs are still rare, despite records, largely because private companies are choosing to sell to larger competitors rather than go public themselves. He’s also noted that oil and gas producers are still heavily discounted, making new IPOs less attractive than acquisitions.
Indeed, an energy analysis company Energetic got in touch that deals by private equity firms have seen a significant uptick as they bought assets that oil companies did not see as core to their development plans. These assets were typically located outside of oil-rich areas such as the Permian Basin of West Texas and New Mexico.
“Private equity still has dry powder for deals. They use this to target assets flagged as non-core by publicly traded companies. Once you get out of the core of the Permian Basin and some other key areas, the competition for deals diminishes and these positions are often available at buyer-friendly prices.‘ Dittmar remarked.
Additionally, private equity is becoming the lender of last resort for fossil fuel companies. While companies like GS have reduced funding to fossil fuels, the massive private equity industry is happily taking its place. According to a recent analysis by the Private Equity Stakeholder Project and the Americans for Financial Reform Education Fund (AFREF), the eight largest acquisition firms have poured almost as much money into coal, oil and gas as the big bank.
According to the nonprofit groups, the PE firms to which belong Apollo Global Management, Blackstone Group, Brookfield Wealth Management, Carlyle Group, KKR and Warbug Pincuscollectively oversee $216 billion worth of fossil fuel assets — equivalent to the amount of money big banks poured into fossil fuels last year.
Another surprising finding: the top 10 private equity funds have 80% of their energy investments in fossil fuels.
“The billions of dollars that private equity firms have committed to drilling, fracking, transporting, storing, refining fossil fuels, and generating energy are in stark contrast to what climate scientists and international decision-makers have been calling for to chart our course toward World War I .5 degree warming scenariosays A report Co-signatory to major climate groups such as Greenpeace, Natural Resources Defense Project, Sierra Club and the Sunrise Project.
By Alex Kimani for Oilprice.com
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