Reflecting challenging market conditions for any company attempting an initial public offering (IPO) of its shares at this time, global insurance and reinsurance player Fidelis Insurance Holdings Limited has priced its IPO well below the marketed guidance range, now looking set to raise up to $241.5 million.
In addition, the company has ended up selling more shares than it was aiming to, while shares offered by its existing investors are fewer than anticipated and overall the offering was for less shares than the initial announcement stated.
That could be viewed as a vote of confidence, as existing shareholders have chosen not to cash out, or a signal that the IPO price achieved was deemed lower than hoped for.
As we reported before, Fidelis announced its initial public offering (IPO) of 17 million of its common shares, as the firm looks to “take advantage of the ongoing rate hardening” in key markets.
The offering was expected to include 5,714,286 of common shares offered by the company and 11,285,714 of common shares to be sold by certain of its existing shareholders, while underwriters would also have a 30-day option to purchase a further 2,550,000 common shares from the selling shareholders.
The targeted IPO price was pitched as in a range from USD 16.00 to USD 19.00 per common share.
In the end, now priced, Fidelis has announced the pricing of its initial public offering today, with an aggregate of 15,000,000 common shares to be sold at a price of USD $14.00 per common share.
So, that’s fewer shares sold than hoped for and at a lower price.
The split, in terms of where the shares are coming from has also changed, with 7,142,857 to be offered by Fidelis and 7,857,143 are being offered by some of Fidelis’ existing shareholders.
The underwriters option, to buy up to an additional 2,250,000 common shares from the selling shareholders at the initial public offering price remains.
However, it remains to be seen whether the selling shareholders opt to make that additional sale of shares, or not.
As a result, the maximum IPO gain achievable is the 15 million of shares in the offering, plus the 2.25 million underwriters option (if taken up), for maximum IPO proceeds of $241.5 million.
If the underwriters option is not taken up, then the IPO proceeds would be $210 million.
Which falls short of the marketed target, that would have seen USD 272 million raised, which could have risen to almost USD 313 million should the option to buy the additional shares have been exercised.
Fidelis said the common shares will begin trading on the New York Stock Exchange under the ticker symbol “FIHL” on June 29, 2023, and the offering is expected to close on July 3rd, subject to customary closing conditions.
Fidelis said that the net proceeds will be used to make capital contributions to its insurance operating subsidiaries, allowing it to take advantage of “the ongoing rate hardening in the key markets in which it participates by writing more business under its planned strategy.”
However, the Fidelis will not receive any of the proceeds from the sale of its common shares by the selling shareholders, so the only proceeds that boost its balance-sheet is actually the shares it has sold itself, which actually has only resulted in a roughly $100 million capital raise, it now seems.
Perhaps not the result Fidelis was hoping for, but in the IPO market conditions this is still positive for the company, as it has raised capital, given some longstanding investors an opportunity to realise some of their investments in the company, plus broadened its shareholder base and now sits on an exchange which will position it will for future capital raising attempts.
Interestingly, publisher IFR said that there has been some uncertainty among investors about the way Fidelis “bifurcated” its business, to recently split the balance-sheet entity from the Fidelis MGU (the underwriting side, which is not part of the IPO), saying investors have been seen to be reluctant to back that approach.
But, the IPO offering has been described as well-oversubscribed, indicating demand for Fidelis shares was sufficient, with perhaps the broader macro-economic environment the main driver of the valuation falling below the guidance range that had been sought.
IFR said the IPO price at USD $14.00 per share, means Fidelis comes to market at only 0.8x the company’s estimated book value of US$17.10 per share.
Richard Brindle, Chairman and CEO of Fidelis MGU, commented on the IPO of the Fidelis Insurance Group, “It has been an incredible year for the Fidelis brand culminating now with the listing of Fidelis Insurance Group the NYSE.
“I applaud my long-time friend and colleague, Dan Burrows, and his highly talented team in their incredible achievement, and I look forward to many years of close collaboration with some of the best capital and risk managers in the industry at Fidelis Insurance Group.”
