(Repeating item that initially moved on Friday)
By Jessica Hall
PHILADELPHIA Jan 30 Changing World
Technologies Inc, which transforms animal and food-processing
waste into diesel fuel, plans to conduct its initial public
offering using an auction system rarely used for IPOs.
A so-called Dutch auction, named after famous Dutch tulip
bulbs that were sold at auction during the 17th century, allows
a company to monitor demand for its stock before the offering.
Since 1999, there have been 22 auction-style IPOs,
representing about 1 percent of all IPOs over that time period,
according to research firm Dealogic.
"The IPOs that have come out in an auction format have not
worked well," said Scott Sweet, senior managing director with
advisory firm IPO Boutique.
The biggest name to use an auction-style IPO was Google Inc
(GOOG.O), which conducted a modified Dutch auction and raised
$1.7 billion in August 2004. Others include software maker
NetSuite Inc (N.N), research firm Morningstar Inc (MORN.O) and
online retailer Overstock.com Inc (OSTK.O) have all opted for
"Google was an anomaly," said Francis Gaskins, an analyst
with IPO Desktop.
"They were branded and had a large customer base. It's hard
to pull off an auction IPO without a household brand name and
customers. The ones that have been successful have brought a
retail customer base to participate in the auction," Gaskins
Changing World, which is unprofitable, sells renewable
diesel fuel oil and organic fertilizers, which it makes using a
proprietary thermal conversion process.
The process can convert a broad range of organic wastes --
including animal and food processing waste, trap and low-value
greases, mixed plastics, rubber and foams -- into fuel and
"This is strictly an alternative-energy play," Gaskins
said. "It's trying to play off the hope that this is a hot
Changing World had a net loss of $19.9 million on sales of
$589,000 in 2007, according to a filing with the U.S.
Securities and Exchange Commission. The company, which said it
has two customers, expects to incur losses "for the foreseeable
future," the filing said.
"Changing World, in any environment, is a poor IPO based on
a very poor earnings picture. But add in the weak IPO market
and the auction style, and you have tougher conditions," Sweet
"This is almost a 'best efforts' IPO," Gaskins said.
DUTCH AUCTION OFFERS LITTLE-TESTED SYSTEM
In a Dutch auction, interested investors submit offers for
how much they are willing to pay for a block of shares. The
final price is set at the highest level at which all the
offered shares could be sold.
Traditionally, IPOs are priced and allocated by Wall Street
firms, which balance the competing interests of trading
clients, issuers and big investors.
Changing World aims to raise roughly $36 million through an
IPO scheduled for Feb. 10, according to Dealogic. The
offering's lead manager, WR Hambrecht, and Changing World did
not return calls seeking comment.
"The IPO market is looking for leaders and Changing World
has nothing to compel people," Sweet said.
Some proponents of the Dutch auction system said it allows
an issuing company to bypass the investment banks that charge
underwriting fees, and avoid competing pressure from traders
that get newly issued shares at a discount that can be cashed
in on the first day.
Changing World plans to list on the American Stock Exchange
under the symbol "CWL" CWL.A.
OVERSHADOWED BY MEAD JOHNSON
Also scheduled to debut the same week is Mead Johnson
Nutrition Co, which makes the infant formula Enfamil and other
pediatric nutritional products.
Mead Johnson, a unit of Bristol-Myers Squibb Co (BMY.N),
aims to raise $562.5 million through the sale of 25 million
shares in an IPO set for the week of Feb. 9. The underwriters
have the option to buy an additional 3.75 million shares.
The company had $2.6 billion in sales for 2007, according
to a filing with the U.S. Securities and Exchange Commission.
"The demand for Mead Johnson will dwarf Changing World,"
Sweet said. "Pharmaceuticals are hot right now and they are in
the niche of children's nutrition and health. Plus, they have
proven sales and a track record."
(Editing by Gerald E. McCormick)