What Happened to Freeport-McMoRan’s Energy IPO?



Freeport-McMoRan’s energy IPO

Freeport-McMoRan (FCX) filed for an IPO (initial public offering) of its energy business more than three months ago. Back then, the news was greeted well on Wall Street, and Freeport’s stock surged higher. However, since then, we haven’t heard from Freeport-McMoRan on the IPO’s proposed date.

Together, Freeport and Teck Resources (TCK) form ~0.9% of the iShares North American Natural Resources ETF (IGE).

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No official announcement

Officially, there’s been no announcement from Freeport that the IPO has been delayed. However, according to a recent report from Renaissance Capital, the IPO has been delayed. Note that the IPO was among the strategic alternatives available to Freeport’s management to reduce its surging debt pile. Crude oil prices were trading near $60 per barrel when Freeport filed for the IPO.

Earlier this year, BHP Billiton (BHP) spun off its non-core assets into a separate entity, South32 (SOUHY).

Crude oil falls

Crude oil prices have resumed their slump over the last couple of months. The chart above shows the recent movement in WTI (West Texas Intermediate). On October 2, WTI closed at $46 per barrel. This is significantly lower than crude prices some three months ago, when Freeport filed for the IPO of its energy business.

Now when Freeport has already raised equity capital to the tune of $1 billion and plans to raise another billion dollars by the same route, it wouldn’t be a surprise if the IPO were delayed. A lot could depend on how Carl Icahn, the single largest shareholder, takes up the energy IPO with Freeport’s management.

Meanwhile, investors could have to wait until October 22, when Freeport announces its 3Q15 financial results. We might get some direction on the IPO’s timelines in their earnings conference call. In the next part, we’ll explore the market’s expectations for Freeport’s 3Q15 earnings.


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