Market briefing --- Matt (slow)5261
Genworth --- Su (fast)
IPO market --- Bob (fast)
welcome to “world financial report.” i am matt nesto. you cannot leave out genworth share, ending the day where they started, $19.50. the financial unit represents the biggest i.p.o. we’ve seen in two years and also a disappointment for some investors as g.e. failed to get the price they might have hoped for. su keenan is tracking that story.
>> it didn’t get the price it wanted when priced overnight. in the late stages of the 1990’s bull market , i.p.o.’s were met with bullish enthusiasm. genworth financial stock was met with investor caution and today fell 3.5% intraday before regaining that loss, closing at the offering price. shars priced last night at $19.50, 7% less than the anticipated range of between $21 and $23 a share. g.e. sold 125 million shares, making it the biggest offering in two years. for now, general electric owns 70% of the insurance unit. jeffrey immelt says he plans to sell another 30% of the company next year and will eventually divest the entire unit. investors, however, say that genworth does not meet the 20% to 25% return on equity goals immelt has set for other units at g.e. and other analysts say that the 9.5% return on equity hurts other insurers.
>> i think they expected the g.e. name and its reputation would help to carry the company. it is a very highly regarded company and it’s a leader in a number of the markets in which they operate. it has an a-plus rating from am best, a coveted rating and i think they expected that to be a catalyst for the stock to trade more in line with its peers.
>> malone offers another reason for investor caution. 39% of genworth’s 2003 profit came from mortgage insurance, and this is viewed as a slow growth business. genworth’s chief executive officer, michael frasier, says the lower-than-expected market price is more a function of market conditions.
>> what we’ve laid out for investors overall was a good, steady growth company they can sleep at night with. we are in the process of still selling debt securities. that happens over the next few weeks so i’m limited what i can say.
>> he did say that 30% of the shares sold were to retail buyers. 70% of the i.p.o. buyers, he says, were institutional. the genworth offering is further evidence to some investors that the i.p.o. market is coming back. bob bowden has that part of the story.
>> first, the caveat, as you pointed out, g.e. had to cut the price of the life, mortgage and insurance business, genworth. g.e. raised only $3.53 billion by selling the 30% of genworth, shy of the $4.5 billion g.e. expected might come from the genworth i.p.o. but after opening lower than the $19.50 i.p.o. price, genworth shares battled back and closed at the same price for which they were offered to i.p.o. buyers. from a bigger perspective, the i.p.o. market in general is expected to stage a rebound from its quiet performance in 2003, the slowest market for i.p.o.’s in 13 years with less than $14 billion worth of stocks sold. the next big event will be the google i.p.o. to be expected to raise $2.72 billion. google has named 31 different underwriters to assist in the sale and the company will let potential buyers bid for shares of google by the internet, phone or fax machine. by combining genworth’s i.p.o. with what’s expected from google, that exactlies $6.25 billion raised in those two deals alone, representing 45% of the entire i.p.o. market last year.it’s not likely to stop there. a senior managing director at friedman, billings, ramsey group, number three i.p.o. underwriting firm last year, said he thinks there will be a healthy clip of i.p.o.’s between now and year’s end. already this year there have been 61 i.p.o.’s raising $10.2 billion, compared to last year, the entire first half of last year, of which there were only 11 i.p.o.’s for $2.9 billion and this year’s total also higher than the 52 i.p.o.’s in the first half of 2002.
>> well, bob, thank you very much.% we’re going to be previewing the toll brothers earnings due out tomorrow. our next guest is bullish on not only toll brothers but the whole building group, analyst with friedman, billings and ramsey joins us to explain.
