Shoal sells gear needed to connect power from solar panels to the grid.
Andrii Biletskyi/Dreamstime.com
Shares of the solar-power company Shoals Technologies Group, which delivered the year’s second-biggest initial public offering, rose nearly 40% at one point in their first day of trading, while a much smaller offering from TRX Insurance Brokers was halted after surging more than 1,000%.
Shoals’s stock opened at $31.30 and hit a high of $34.90. Shares closed Wednesday at $30.98, up nearly 24%.
Shoals (ticker: SHLS) collected $1.93 billion after boosting the size of the deal and pricing the stock above the range it had told investors to expect—two signs of strong demand. Shoals had originally planned to offer 50 million shares at $19 to $21, which it increased to 70 million shares at $22 to $23 earlier this week.
Late Tuesday, Shoals sold 77 million shares at $25 each.
Investors “really understand the technology growth in the sector we are in,” said Jason Whitaker, CEO of Shoals. “It’s a direct reflection that our high quality business is growing very rapidly in some exciting market categories.”
At $1.93 billion, the Shoals IPO ranks behind only the Playtika Holding IPO, which raised $2.16 billion earlier this month, according to Dealogic. Shoals is also the latest solar IPO. Array Technologies (ARRY) went public in October, raising $1 billion, with a share-price gain of 65% on the first trading day.
Goldman Sachs and J.P. Morgan are underwriters on the Shoals deal.
The Portland, Tenn.-based company supplies the products needed for electrical balance of systems, or EBOS—the gear needed to carry the electric current produced by solar panels to an inverter and ultimately to power-grid cable assemblies. Shoals sells its equipment to customers such as engineering, procurement, and construction firms.
Whitaker emphasized the large opportunity in solar. “Specifically in North America, only 3% of electricity comes from renewables. There is lots of runway ahead of us,” he told Barron’s.
Shoals reported $29.5 million in net income for the nine months ended Sept. 30, up from $17.3 million for the same period in 2019, the prospectus for the deal said. Revenue rose 28% to $136.8 million. It had 44 full-time employees as of Sept. 30.
Shoals has been growing. For the last three years, the company’s top line has increased more than 30%, while earnings before interest, taxes, depreciation, and amortization, or Ebitda, has jumped 70% per annum for the last 3 years.
Most of the proceeds from the IPO aren’t going to Shoals but to its private equity owner, Oaktree Capital Management, which invested in Shoals in 2017. Of the 77 million shares offered in the Shoals IPO, 68 million came from Oaktree. At $25 a share, Oaktree is expected to make at least $1.7 billion. The PE firm will own roughly 10.5 million Class A stock, valued at $325.9 million, and will have 6.3% combined voting power after the IPO, the prospectus said.
Shoals sold 9 million shares in the IPO, valued at $225 million. The company plans to use proceeds to pay down debt, Whitaker said.
The IPO also capped a roughly two week virtual roadshow, where Shoals management spoke to “hundreds of people,” Whitaker said.
TRX Insurance Brokers (TIRX), based in Beijing, also began trading. The stock opened Wednesday morning at $16.45, over four times its $4 offer price, and hit a high of $18.10 at roughly 10:51 a.m. Eastern time. Nasdaq halted the stock due to a “limit up-limit down” rule that is meant to address extraordinary volatility in U.S. equity markets, a Nasdaq spokeswoman said.
“TRX spiked out of its price band,” she said. The Chinese company didn’t immediately respond to a request for comment.
TRX restarted trading Wednesday afternoon and hit a high of $50, for a gain of 1,150%. It ended at $21.50, up 537.5%.
Late Tuesday, TRX raised $12 million, selling three million shares at $4 each, the low end of its $4 to $4.50 price range, according to a statement.
Network 1 Financial Securities is the underwriter on the IPO.
TRX, an insurance broker in China, has relationships with more than 40 insurance companies in that country. The broker handles property and casualty coverage, including for autos, as well as life insurance.
According to the company’s prospectus, the pandemic hurt TRX last year, hampering its ability to sign on customers or open branches. TRX reported losses of $235,709 for the six months ended April 30, compared with a profit of $251,788 for the same period in 2019. Revenue dropped nearly 35% to $707,794, the prospectus said.
TRX has about 47 employees.
Write to Luisa Beltran at [email protected]
