Underwriting Syndicate Bonanza Continues (FTNT, AWK, BZ, LFT, SII)

This morning we have a syndicate bonanza with a very solid IPO pricing and many secondary offerings getting priced.  Fortinet, Inc. (NASDAQ: FTNT) priced 12.5 million shares in IPO at $12.50, above the $9.00 to $11.00 range.   There are also many secondary offerings:  American Water Works (NYSE: AWK) 37.35 million shares priced at $21.63; Boise Inc. (NYSE: BZ) 17 million shares priced at $4.85; Longtop Financial Technologies Limited (NYSE: LFT) 3.7 million shares priced at $31.25; Smith International Inc. (NYSE: SII) priced 28 million shares priced at $26.50.

We have detailed information on the size, use of funds, underwriters, and performance on each below.

At Fortinet (NASDAQ: FTNT) and the priced 12.5 million shares in IPO at $12.50, the deal breakdown is as follows for the $156 million offering: 5,781,683 shares are being sold by the company and 6,718,317 shares are being offering by selling stockholders. Morgan Stanley, J.P. Morgan, and Deutsche Bank are joint book-runners; Robert W. Baird, RBC Capital Markets, ThinkEquity, and JMP Securities, and Signal Hill Capital Group LLC are co-managers. In addition, Fortinet has granted the underwriters a 30-day option to purchase up to an additional 1,875,000 shares of common stock to cover over-allotments.  Fortinet is in the field of network security and unified threat management solutions, and it priced above the $9 to $11 indicated range.

American Water Works Company, Inc. (NYSE: AWK), the largest water utility in the U.S., priced a 37.35 million shares at $21.63 per share after a closing bell price of $21.63 yesterday for a sale of close to $800 million.  This stake is entirely from RWE AG, the former parent and majority/largest holder, so none of the $784 million in gross proceeds go to American Water itself.  BofA Merrill Lynch, Credit Suisse, and Morgan Stanley are joint book-runners.  Shares are up 0.3% at $21.71 after a $21.63 close yesterday.

Boise Inc. (NYSE: BZ) 17 million shares priced at $4.85, and all shares here are also being sold by shareholders and insiders in the $82+ million raise.  Goldman Sachs was the sole book-runner.  Boise Cascade Holdings, L.L.C. (and trusts affiliated with Jason Weiss) will now ‘only’ hold about 25% of Boise’s common stock after the offering.  Shares are down 3.3% at $4.92 after a $5.09 close yesterday.

Longtop Financial Technologies Limited (NYSE: LFT) is actually trading way up this morning after it priced 3.7 million shares (ADS’s) at $31.25 per share, for more than $115 million raised.  Longtop is into software development and solutions which target the financial services industry in China.  The use of the net proceeds of the offering are earmarked for potential acquisitions and for general corporate purposes.  Deutsche Bank and Morgan Stanley were the joint book-runners.

Smith International Inc. (NYSE: SII) priced 28 million shares priced at $26.50 in a $730 million approximate raise.  Oddly enough, Citigroup just raised the rating on Smith International.  The net proceeds from the offering will be used for debt repayment, general corporate purposes, and funding of potential acquisitions or investments.  J.P. Morgan Securities Inc. is the book-running manager for the deal.  Shares are actually up 4% at $27.97.

We are seeing a whole new slate of S-3 secondary filings and still seeing plenty of S-1 IPO filings at the SEC each day.  If the market holds up, there will be many more days where the stock market has to absorb the $1.86 billion absorbed by the market this morning in new shares on the market.

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JON C. OGG
November 18, 2009