Two Key IPOs On Deck: Chesapeake & Molycorp (CHKM, MCP, CHK)

There are two tentative IPOs on deck this week we are watching closely.  Both are currently indicated for pricing on Wednesday evening and Thursday trading.  The first, in alphabetical order, will come from Chesapeake Midstream Partners (NYSE: CHKM), with ties to Chesapeake Energy Corporation (NYSE: CHK).  The second stand-out IPO on deck Molycorp Inc. (NYSE: MCP).

Chesapeake Midstream Partners

Chesapeake Midstream Partners (NYSE: CHKM), a 4-letter ticker on NYSE, is on deck to raise roughly $425 million via its IPO that is expected to price Wednesday or Thursday.

This is a natural gas gathering systems limited partnership formed by Chesapeake Energy Corporation (NYSE: CHK) and GIP.  The top underwriters in the deal are UBS, Citigroup, and Morgan Stanley.

The offering as of Monday is expected to be 21.25 million with an anticipated range of $19.00 to $21.00.  This generates a market cap of close to $.8 billion if it comes at the mid-point of the range.  Our initial reviews indicate a premium pricing, although trading and pricing indications in IPOs have been worth little of late.  With fixed fee contracts in place with Chesapeake and partners with annual escalations, this will be one to watch for MLP investors.  Morningstar gave a yield and fair value scenario.

Molycorp Inc.

Molycorp Inc. (NYSE: MCP) is going to be one of the first few rare-earth metals public stocks in America.

Its 28.1 million shares is expected in a range of $15.00 to $17.00 per share, which generates just under $450 million in IPO proceeds.  For a comparison, the S-1 filed earlier this year was for up to $350 million.  J.P. Morgan and Morgan Stanley are the lead underwriters on the deal.

The implied market capitalization will come in at just under $1.3 billion at the current price target.   will command a market value of $1.3 billion.  The company claims to be the only rare earth oxide producer in the Western hemisphere and claims to own the largest and most fully developed rare earth project outside of China.  An issue is that it generated only $7.1 million of revenue from sales of products manufactured from stockpiled feedstocks in 2009.  While it stated that this level of revenue is not representative of its planned level of operations after it restarts mining operations, this is going to potentially be treated as a “re-start-up” by many investors.

These are the two standout IPOs we’ll be watching for trader interest this week based on the IPOs and based upon moves in peers.

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JON C. OGG