Compared with the
crazy IPOby lithium-ion battery maker
A123 Systems (Nasdaq: AONE) last Thursday,
Select Medical Holdings ' (NYSE: SEM) IPO a
day later was downright sick.
Shares of the manager of specialty hospitals and
rehabilitation centers debuted at $10 each, which was below
the expected $11-to-$13 range. The company also sold about
10% fewer shares than originally planned. At the end of the
first day of trading, Select Medical was up, but only
$0.09.
Select Medical is one of those public-private-public
deals. Having once been a public company, it was taken
private in 2005 for about $2.3 billion. The private equity
firm that bought the company isn't cashing out on the IPO,
though. The shares sold on Friday were all from Select
Medical, not the private equity owners.
The company plans to use the $300 million or so in
proceeds to pay down debt. It'll help a little, but the
company will still be quite leveraged, having had nearly $1.7
billion in debt at the end of June.
Fellow hospital operators
HealthSouth (NYSE: HLS) and
Kindred Healthcare (NYSE: KND) have been on a
tear this year, up more than 30% -- roughly double the rise
in the S&P 500.
Whether Select Medical can join the party likely depends
on how
health-care reformplays out in Congress. If Medicare
reimbursement rates get cut, that would hurt Select Medical,
which counts on the government program for nearly half of its
revenue. While the government is moving toward lowering
health-care costs, I'm inclined to think that Congress will
be careful about cutting Medicare services, given the large
voting block of seniors.
What do you think? Help our
supercomputerfigure out if Select Medical deserves an
outperform or underperform rating in
Motley Fool CAPS.
This article was originally published as
This IPO Is Sluggishon
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