Sucessfully IPO Old Line Commodities Help Stock Market Rally

The most successful IPOs from the fourth quarter were primarily old-line commodities businesses sold by governments rather than venture capitalists. More recently, Internet companies have garnered the most attention in equity capital markets. LinkedIn Corp. shares doubled on May 19, their first day of trading.

A total of $127 billion was raised globally in IPOs in the fourth quarter, more than in all of 2009, helped by a stock market rally that lifted the MSCI World Index as much as 86 percent above its March 2009 low.

The third-best performer, after Coal India, was Malaysia?s Petronas Chemicals Group Bhd. (PCHEM), which was spun off by the state- owned oil exploration and production company. Its shares gained 39 percent through May. In fourth place, Australia?s QR National Ltd. (QRN), a coal-train operator that was sold by the Queensland state government, returned 35 percent.

Money manager William Fries went to India in the summer of 2010 in search of investments for his Thornburg International Value Fund. Visiting companies in Mumbai and Delhi, he found they kept diesel backup generators on hand for the power interruptions that are common as the country struggles with an inadequate electricity supply.

That led Fries, four months later, to buy shares in the $3.5 billion initial public offering of Coal India Ltd. (COAL), the state-owned coal producer. He reasoned that sales of India?s main power-plant fuel would grow as more generation is added, helping the company?s earnings.

The bet has paid off. Coal India shares soared 67 percent through May 31 from their price in the IPO on Oct. 25. That?s the best performance for any initial share sale that raised $1 billion or more in the fourth quarter of 2010, the busiest quarter ever for new share issuance.

Returns were positive for 11 of the 14 sales in this ranking, Bloomberg Markets magazine reports in its August issue. The average gain was 15 percent.

Fries, a managing director at Thornburg Investment Management Inc. in Santa Fe, New Mexico, continued buying Coal India as the shares climbed after the IPO. ?The demand for their product is going to be there,? he says. ?India has a big shortage of electricity, and they?re going to be building lots of power plants over the next decade.?