Going Public: What Does It Mean for the Industry?August 12th, 2013 | Category: Industry News
The recovery has prompted two window companies to approach the public market with their shares. In July, Associated Materials filed for a $100 million initial public offering (IPO). The Ply Gem IPO, in May of this year, was met with strong buyer interest. These moves lead many to wonder what this means for the door and window industry. Are these additional positive signs in favor of the recovery?
PGT Inc. (NASDAQ: PGTI) was previously the only publicly traded pure play window maker in the U.S. Ply Gem’s sales include revenue from siding and other products, in addition to doors and windows, says Michael Collins, investment banker and a partner in Building Industry Advisors, and DWM blogger.
In general, what does it mean when companies begin to undertake IPOs in a given industry?
“It might seem to be a positive indicator for the industry, since investors are gobbling up shares,” says Collins. “However, the seller of those shares is the group that knows more about the company and its future prospects than anyone. And they’re selling. As often as not, a rash of IPOs can mark the top for an industry. However, we think these recent IPOs are an exception.”
Why? Because both Associated Materials and Ply Gem are controlled by private equity (PE) funds.
“When a PE fund buys a company, one thing is virtually certain – at some point in the future, that fund will sell that company to someone else,” says Collins. “Thus, these IPOs appear to be very elegant solutions for groups that needed liquidity in two hefty holdings.”
Overall, Collins says these recent door and window IPOs are a good sign for the industry, one that brings with it interesting financial information from public filings.
“Companies wishing to benchmark their financial performance against that of larger competitors will find these IPOs to be the source of valuable and useful information. Also, the financial success of these companies is further indication that the recovery is in full swing,” he says.