WASHINGTON - The market for auto dealer initial public offerings is bad, in a word, so groups that want to pitch an IPO should bide their time or explore other ways to go public.
That was the advice of two experts at the American International Automobile Dealers Association convention here last week: Sean Schickedanz, vice president of Montgomery Securities in San Francisco, and Vince Foster, a partner at Arthur Andersen LLP in Houston.
'There has not been a major auto IPO in the last six months, because the market has been soft and very unsure,' Schickedanz said.
He said at least 10 dealer groups are in various stages of preparing to go public, but the stock of most groups that have gone public so far has fallen below the initial offering price.
'People are aware they're going to leave some money on the table if they go public now, if they can get it done at all,' he said.
Foster and Schickedanz mentioned a couple of ways to go public other than an IPO.
One would be a 'roll-up,' an alliance of dealer groups, to issue 'high-yield' debt (a nicer name for junk bonds). The group would have to comply with the same Securities and Exchange disclosure rules as an IPO, but the process is probably faster than an IPO. That, in turn, gives the group faster access to capital before the best dealerships are bought up, Schickedanz said. At least one such deal should be announced soon, he said.
Another alternative is to combine with a company that is already traded publicly, Foster said.