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Phoenix IPO drops
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June 20, 2001: 2:15 p.m. ET
New issue from financial services firm falls 4% below $17.50 offer price
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NEW YORK (CNNfn) - The initial public offering from the Phoenix Cos. Inc., a demutualized insurer, fell more than four percent Wednesday.
Shares for Phoenix dropped 74 cents to $16.76, below the IPO's $17.50 offer price, which technically makes it a "broken" deal.
Phoenix's fall was somewhat expected, said analyst Mike Falbo of IPOpros.com. The company has an erratic income history, posting $120.8 million in 1996 which grew to $169 million in 1997, but then earning only $137 million in 1998 and $89.2 million in 1999. Last year, Phoenix's income fell to $83.3 million, Falbo said.
"That's a very steep drop," he said. "They're a financial services firm with bad financials."
Phoenix's dismal performance follows a failing grade for Princeton Review Inc. (REVU: down $1.97 to $7.53, Research, Estimates), a provider of test preparation services, which fell 14 percent Tuesday.
The new issues market is still good but many deals are having problems maintaining their IPO price in the aftermarket, Falbo said. But this week's modest gains were expected following the poor performance of Kraft Foods Inc. which went public last week.
Kraft (KFT: down $0.10 to $30.30, Research, Estimates), the year's most anticipated IPO, added a quarter in its first day of trade but has since dropped below its $31 offer price.
"Underwriters need to take a more serious approach on how they price these deals. If investors are getting burned on these deals, this dries up [their] clients," Falbo said.
Phoenix raised $854 million late Tuesday, selling 48.8 million shares at $17.50 each, above its $14.50-to-$17 range, via lead underwriters Morgan Stanley and Merrill Lynch.
Hartford, Conn.-based Phoenix (PNX: Research, Estimates) offers life insurance plus annuity products and services through Phoenix Home Life Mutual Insurance Co. The company also offers wealth management products and services to the affluent and high net worth market.
The 150-year-old Phoenix is demutualizing and changing from a mutual to a stock company. The New York State Superintendent of Insurance earlier this month gave its approval for Phoenix to change to a stock life insurance company. The demutualization will become effective upon completion of the Phoenix IPO.
The company is the latest insurer to demutualize. John Hancock Financial Services Inc. (JHF: up $0.38 to $40.00, Research, Estimates) and Metlife Inc. (MET: up $0.65 to $31.00, Research, Estimates) both went public last year, while Prudential Financial Inc., the No. 2 U.S. life insurer, is expected to launch an IPO in fourth quarter.
Phoenix had $59.4 billion in assets under management as of March 31. 
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