Investors Torpedo Batista Shipping Float

Eike Batista’s oil services and ship building unit OSX has raised 62% less than targeted through its IPO, a deal widely expected to be one of the biggest LatAm equity issues of 2010. Investors appeared unanimous in their refusal to buy into the Brazilian company, whose earnings potential is untested. OSX priced 3.06m shares plus 459,000 greenshoe units at BRL800 each to raise a total BRL2.82bn. That is 62% less than the BRL7.38bn it would have raised had it maintained the original offering size of 5.51m base shares plus 827,000 greenshoe units and priced at the originally proposed BRL1,167 midpoint. “The market is difficult and investors didn’t understand the value proposition of the company,” complains a banker leading the deal. “They didn’t want to assign value to the upside,” he adds. LatAm equity investors say they will not pay up front for unrealized value. OSX has not generated positive Ebitda since its inception, according to its prospectus. In an effort to avoid dilution as the deal headed towards a lower price, Batista, eighth richest man in the world according to Forbes, opted to refile late Tuesday. He did so at a lower price point and reduced offering size. Evan after the reduction, OSX is among the largest IPOs Brazil is likely to see this year. It also represents a coup for Batista, who now owns 5 publicly listed companies. Credit Suisse, Itau BBA, Bradesco BBI, BTG Pactual and Morgan Stanley led the trade.