New Skies Satellite BV became the second Fixed Satellite Service (FSS) operator acquired by private equity owners in recent years to launch an initial public offering (IPO) of stock. New Skies began trading May 10 on the New York Stock Exchange under the ticker symbol “NSE,” following Panamsat into the publicly traded arena.

The IPO, priced at $16.50 per share, raised $196 million for New Skies and its private equity owners, The Blackstone Group. But unlike Panamsat, New Skies’ stock never fell below its IPO price, climbing as high as $16.97 before ending the first day of trading at $16.58. Panamsat, which had an IPO price of $18 per share, immediately dropped on its first day of trading (SN, March 21) and did not close a trading day at or above its IPO price until May 3.

A representative from New Skies declined to be interviewed, citing a quiet period that extends 25 days past the IPO date. A representative from Blackstone also declined to be interviewed.

Mixes Reactions

The IPO was met with mixed reaction by industry analysts and observers.

“This is a good thing for the industry,” an industry observer told Satellite News. “It is a good thing to have more than one somewhat comparable FSS provider with a publicly traded stock. When it is just Panamsat, there is nothing to compare it to. Obviously, New Skies is a smaller operation with a somewhat different business, but nevertheless it gives something for investors to compare. The more similar operators we get out there, [the more] investors will be able to distinguish the strengths of each of the companies with greater precision.”

The public markets seem to be improving for satellite companies, but there remains a level of uncertainty about how the public will react to satellite stocks, the observer said.

“I think it is a little tough to read the market in general because there are only a handful of satellite stocks being traded,” the observer said. “You throw that uncertainty up against a stock market that seems to be gyrating itself and seems to be on-again, off-again with regard to tech stocks. I think it is hard to read exactly which way the market is going, generally. There are macro economic issues as well” including the United States and global economies to consider, the observer added.

That being said, the early results of New Skies trading does show some encouraging signs for the satellite industry moving forward.

“I think it is an encouraging sign when you see a satellite stock float and it has not dropped off the table,” the observer said. “I think it is one of those things that needs to be watched over time to see how the market reacts to these satellite stocks. Because this is a second time around for many of these stocks, it will be interesting to see how the market reacts to them. If the market proves to be receptive, that is going to encourage more private equity folks to do IPOs. There is no question that this is what everybody is watching for.”

Steven Symonds, founder and president of Symonds Associates LLC, was a bit more restrained in his reaction to the IPO results.

In comparing the results of Panamsat’s first day of trading to New Skies’, Symonds told Satellite News, “I do not think that anybody can say that [Panamsat’s] performance was a home run in terms of price per share that was achieved,” Symonds said. “It was not a poor showing, but I don’t think it was what people were hoping. It accomplished what Panamsat’s objectives were, but I don’t think it got the bounce that people were expecting.”

Symonds added, “The fact that [New Skies] ended up above their strike price indicated the timing was good. The fact that the bounce was so small, I think, is consistent with what you are seeing in terms of the judgment about the long term prospects for the business.”

In particular, Symonds raised the familiar question regarding private equite owners: how will they handle replacing in-orbit assets?

“That is the elephant in the room,” Symonds said. “What do you do when you face serious fleet replacement requirements and who is going to pony up the capital for that? As private equity guys, you do not want to end up getting stuck with the fleet recapitalization requirements. It was just fortuitous for them that the market turned up as quickly as it did and enabled them to unload what they bought in at.”

Acquisition Target

For New Skies, the bounce the stock experienced could be the result of anticipation that it will be acquired at some point.

“For New Skies, the question is: What happens to a regional player?” Symonds said. “The real issue is: Are they going to be gobbled up by somebody? Part of the market psychology may be [investors] are buying New Skies knowing that they are going to be a takeover target or a merger target of some type, so investors will give New Skies more of a premium than Panamsat. In order for somebody to do a deal with New Skies, they are going to have to pay something of a premium.

“There are no surprises with Panamsat,” Symonds added. “What you see is what you get. With New Skies, everybody knows they have to get married or bought out.”

Though Symonds did not offer any specific thoughts on what companies may be in line to acquire New Skies, current speculation centers on Intelsat becoming the partner.

That speculation gained additional momentum when the two companies asked Congress April 14 to remove merger restrictions in the Open-Market Reorganization for the Betterment of International Telecommunications, or ORBIT, Act that prevent the two companies from merging for 11 years after the companies are in compliance with the ORBIT Act (SN, April 19). Intelsat announced April 18 it received compliance certification.

–Gregory Twachtman

(Steven Symonds, Symonds Associates, 203/834-2766)