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Peabody IPO heats up
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May 22, 2001: 4:38 p.m. ET
Largest private sector coal company rises 31% in first few hours of trade
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NEW YORK (CNNfn) - The IPO from Peabody Energy Corp., one of the world's largest coal companies, climbed nearly 31 percent in its first day of trade Tuesday.
Peabody hit a high of $38.05 before closing at $36.80, a gain of $8.80, on the New York Stock Exchange.
St. Louis-based Peabody (BTU: Research, Estimates) priced 15 million shares at $28 each late Monday via lead underwriter Lehman Brothers. The company had planned to offer 15 million shares at $25 to $27 each, up from the $22-to-$24 range.
Peabody is the latest energy-related offering to score a strong opening day premium. Gas turbine maker Global Power Equipment Group surged 57 percent in its market debut last Friday. Such offerings are benefiting from the energy crisis engulfing California that could spread throughout the nation, analysts said.
In the overall IPO market, the last five issues -- including Global Power (GEG: up $0.75 to $35.55, Research, Estimates) -- have performed strongly in their market debuts, with all maintaining their premiums.
Electronic stock market operator Instinet Group Inc. (INET: up $1.53 to $20.55, Research, Estimates) has gained about 40 percent overall after rising 22 percent from its $14.50 IPO price on its first day of trading. Optical switch maker Tellium Inc. (TELM: up $1.45 to $27.10, Research, Estimates) has risen about 80 percent overall after gaining nearly 40 percent from its $15 IPO price in its debut.
"The breadth of IPOs is broadening," said Tom Frangione, a portfolio manager at mutual fund firm Metamarkets.com. "Investors are coming back to the market. They're sticking more than just their toe but their whole foot in the water."
However, Frangione doesn't believe the strong performance will start a run of new issues similar to late 1999 and early 2000, when anything and everything went public. "What we are going to see now is only good solid companies with good solid business plans can go public," he said.
Peabody sold 181.6 million tons of coal for the year ended March 31, giving it a 16 percent share of the U.S. market. The company sold coal to more than 290 electric generating and industrial plants, or 9 percent of the U.S. and 2.5 percent of the world's electricity producers, according to a filing with the Securities and Exchange Commission.
After the IPO, Lehman Brothers Merchant Banking Partners II L.P. and affiliates will hold a 59.3 percent stake of Peabody. 
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