Hospital staffing and administrative support company Team Health Holdings is set to complete its initial public offering this week, but it faces an investment community that's winding down for the year and still smarting from hits taken in last week's IPOs.
The Knoxville, Tenn.-based company is expected to price its offering Tuesday night and make its trading debut on Wednesday, said analyst and IPOfinancial.com President David Menlow. Team Health expects to offer 20 million shares priced between $14 and $16, and list its shares on the New York Stock Exchange under the symbol "TMH."
Shareholder Ensemble Parent LLC, an affiliate of The Blackstone Group, is offering 9.3 million shares of the total, but Team Health will not receive proceeds from that sale.
The company said in filings with the Securities and Exchange Commission it expects to generate proceeds of about $146.1 million after deducting underwriting discounts and commissions. It will use the funds to repay debt.
Team Health said it does business with about 550 hospital clients and related clinics in 46 states. The bulk of its revenue comes from providing staffing and services for hospital emergency departments, most of which are located in larger hospitals.
The company reported profit of $55.2 million for the first nine months of 2009 on about $1.07 billion in revenue. Team Health lists $612 million in total debt on its balance sheet.
That debt load is a concern for investors, according to Menlow.
"Although one of the smartest reasons for a company coming public is to deleverage their balance sheet, this is a company that still is going to have a significant amount of debt," he said.
He also noted that uncertainty surrounding the health overhaul debate in Washington, where Congress is weighing measures to cut costs and cover the uninsured, may dampen investor interest.
Team Health is one of four IPOs set for this week, and they all may receive a lukewarm reaction from investors, said John Fitzgibbon of IPOScoop.
"This is the last shopping day before Christmas, so to speak, this week," he said. "The feedback we're getting is people are laying low. The company may be very good, but we're talking about the stock, and there just doesn't seem to be any enthusiasm for anything on this week's IPO calendar."
He also noted that some IPOs from last week, including KAR Auction Services Inc., had to cut their prices, and this can make investors cautious.
Many investors also have already booked good returns this year, said Linda Killian of Renaissance Capital.
"What's been happening is we're getting to the end of the year, and there are a lot of institutional investors who would be counted on to buy this who just aren't around," he said. "They've closed down for the year."