Fortegra Cut Cord on IPO at the Last Minute—What Happened?

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Apr. 29 2021, Updated 12:03 p.m. ET

In the same week that Fortegra Group Inc. was expected to start trading, the Jacksonville-based company decided to cut the cord on its IPO. The consumer protection and specialty insurance company's move surprised a lot of people.

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What happened with the Fortegra Group IPO? Will investors see another offering after the dust settles? 

Fortegra's parent company has a lot to do with it.

Fortegra is owned by a company called Tiptree Inc. (NASDAQ:TIPT), which is already publicly traded. Tiptree went public in 1998 and the share value has been on a wild ride ever since.

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Tiptree stock crashed just before the 2008 Great Recession and hasn't been able to rebound to its former levels. The lifetime returns are down 52.03 percent, although the returns since March 2009 are up 201.4 percent.

Recently, Tiptree has been doing well. The shares over the last 12 months are up 50.44 percent, although the news about Fortegra's cancelled IPO has caused the stock to drop 28.84 percent since the market opened on April 28.

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All of this amounts to a strategic move on Tiptree's part. Initially, the parent company wanted Fortegra to pursue a separate stock because it didn't think that the company's valuation had enough room in the overall stock. Recently, it seemed like Tiptree and Fortegra changed their minds. 

Fortegra isn't going public due to unfavorable market conditions.

In a registration withdrawal request to the SEC, Fortegra said that it has "determined not to pursue the initial public offering to which the registration statement relates." 

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The company also confirmed that no securities have been sold to any investors in the deal.

The Jacksonville Daily Record reported that Tiptree placed a high value on Fortegra, and current market conditions don't reflect that. 

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It seems that the company doesn't think that the IPO would have fared well in the current landscape. Fortegra cutting its losses before trading started was the best move for Fortegra and Tiptree as a whole. Fortegra is the key operation in Tiptree's collection of businesses. The IPO was projected to bring in $119.5 million from 8.3 million shares at $15–$17 apiece.  

Will Fortegra attempt another IPO?

The market isn't a stranger to second IPO attempts. For example, WeWork announced an IPO in 2019 before internal issues led to the offering's demise. Now, the company plans to go public again.

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Fortegra's situation seems to be different, although it does seem like there's something going on under the surface given the company's last-minute decision. It isn't clear whether or not the company will attempt a second IPO, but based on the explanation of unfavorable market conditions, it likely won't be anytime soon.

Also, Fortegra will have to account for the money that it spent on the registration process. Usually, offerings around the $100 million mark pay 6.5 percent–7 percent in bank fees (and that's just a portion of the fees involved). 

If this failed IPO tells retail investors anything, it's to be wary of pre-IPO investments. They aren't always available, but when they are, they definitely carry additional risk since the company can back out of the offering entirely.

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