Ingram Micro Holding Corporation (NYSE: INGM) is public once again. After its private equity-backed offering of 18.6 million shares, and an additional 2.79 million shares in an overallotment option, the world’s top IT distributor’s sale at $22.00 per share performed well initially with a $24.60 opening day closing price. Now its quiet period has ended and analysts in the underwriting syndicate are free to issue rating and price targets.
Many of the analyst calls are positive with strong upside to some of the target prices. There is just one problem with Ingram Micro’s post-IPO trading — it only closed higher than the day-one price on just one occasion, and even then it was just by a penny. Ingram Micro didn’t even get that much love from the election bounce. Monday’s post-analyst coverage reaction was negative at first but the stock was then trading up 0.4% at $22.85.
Oggonomics has conducted a 360-degree review of Ingram Micro to see if strategic investors will want to Buy, Sell or Avoid the stock. The answer may vary greatly depending on each investor’s view of the technology distribution space ahead and the stock market and global economy. Oggonomics is not making a case to buy or sell Ingram Micro. Any decision to buy or sell is up to each investor and that decision should be made along with a financial advisor.
PRIVATE EQUITY SHARES & USE OF FUNDS
The 18.6 million shares that sold at $22 per share was broken down as 11.6 million shares sold by the company and 7 million sold by private equity backers. Ingram Micro’s portion of the sale (roughly $233.1 million net after fees) went back to the company initially, but the company received no proceeds from the private equity sellers.
Then those net proceeds from the offering were earmarked to repay a portion of its outstanding debt under its term loan credit facility.
Platinum Equity LLC was a seller of 7 million shares initially and was then a seller of 2.79 million more shares after the overallotment allocation was exercised. All of those proceeds go back to Platinum Equity and its affiliates.
Even after he full exercise of the overallotment option, Platinum Equity still owns 210,952,854 shares of common stock. That is still a total stake of 89.6% of Ingram Micro’s outstanding shares.
INSIDER BUYING USUALLY SOUNDS GOOD, BUT…
There was a little bit of horse trading that took place in Ingram Micro shares at the IPO. Ingram Micro’s CEO, CFO and other executives and officers were buyers to the tune of more than 350,000 shares worth more than $8 million.
Was this enough insider buying considering that the market cap is well over $5 billion?
BEFORE & AFTER THE QUIET PERIOD EXPIRATION
As noted earlier, Ingram Micro’s first day close of $24.60 looked fine on the surface. The IPO’s post-opening print after a $22.00 price was actually at $25.28 and with a opening day high of $25.69 before settling in at that $24.60 closing price. On the morning of the new analyst coverage, Ingram Micro shares were last seen trading down more than 1% and under $22.50 per share before recovering to a slight gain after having closed at $22.75 on Friday.
So far, and without knowing the share movements in the coming days, this is not exactly a beautiful story. It’s still better than trading as a busted-IPO though.
PRIVATE EQUITY OVERHANG AHEAD
There may be some mechanics of private equity-backed IPOs at work here. Investors know that the private equity backers will all eventually want out and to move on. Platinum Equity closed on its Ingram buyout in 2021 for $5.9 billion of equity value (or $7.2 billion enterprise value after the assumption of debt) after buying the business HNA Technology Co. Ltd. (part of HNA Group in China).
It is well known that private equity buyers want their money back once they become sellers. That means that there will be many more rounds of share sales by Platinum Equity in the future. Unless other large companies work out privately negotiated buy-in transactions this could literally be years of share sales ahead. And in traditional private equity sales that can act as an overhang on the stock until those shares for sale are ultimately cleared out.
Again, that 210,952,854 shares of common stock still owned by Platinum Equity is listed as an 89.6% total stake in the company.
INGRAM SALES THEN VERSUS NOW
When Ingram Micro was taken private in 2021, the “world’s largest provider of technology solutions and mobility, cloud, platform and supply chain solutions” had seen $49 billion in revenue for fiscal year 2020. In 2023, its net annual sales in the IPO summary were $48 billion. Revenues for the September quarter came in after the IPO closed. The third quarter of 2024 saw sales of $11.762 billion, down from $11.925 billion in the same quarter of 2023.
At the time of the 2021 acquisition’s closing, Ingram Micro counted over 35,000 employees with operations in 60 countries. It counted more than 170,000 customers and partners with over 1,600 vendors. The more recent IPO summary listed operations in 57 countries and more than 24,100 full-time associates.
HOW THE LEAD UNDERWRITERS RATE INGRAM MICRO
There have been many “Buy” and “Outperform” rating issued by the analysts from the underwriting syndicate. That said, there have also been some less than enthusiastic analyst calls. The first reviews are from the joint book-running managers listed as Morgan Stanley, Goldman Sachs and also J.P. Morgan. These ratings were shown as follows:
- Morgan Stanley’s first analyst report was issued as Equal-Weight with a mere $24 price target.
- Goldman Sachs was much more positive with a Buy rating and a $33 price target.
- The J.P. Morgan rating was not yet available to the public.
ADDITIONAL BOOKRUNNERS
BofA Securities, Deutsche Bank Securities, Evercore ISI, Jefferies and RBC Capital Markets were listed as bookrunners for the proposed offering. The co-managers were also listed as BNP Paribas, Guggenheim Securities, Raymond James, Rothschild & Co, Stifel, William Blair, Fifth Third Securities and Loop Capital Markets. Not all of those ratings have been made public. These are the positive ratings seen so far:
- BofA started as Buy with a $30 price objective
- Jefferies started as Buy with a $28 price target
- Redburn Atlantic started as Buy with a $30 target
- Deutsche Bank started as Buy rating with a $26 target
- Loop Capital started as Buy and a $30 target
- William Blair started as Outperform (no target seen)
- Stifel started as Buy with a $28 target
- Redburn Atlantic started as Buy with a $30 target
- Raymond James started as Outperform with a $28 target
- RBC Capital Markets started as Outperform with a $26 target
The more cautious ratings seen so far were as follows:
- BNP Paribas started as Neutral with a $25 price target
- Evercore ISI started as In-Line and a $27 price target.
IN THE END…
How to interpret these analyst ratings is up to each investor individually. Oggonomics does not have any in-house rating nor does it have any price target on shares of Ingram Micro.
All investors know that Ingram Micro shares are going to be sold in the quarters and years ahead unless Platinum Equity is able to secure privately negotiated share sales with some of the top firms. The IPO even after the overallotment option was exercised is still not enough shares for a company with a market cap of more than $5.3 billion.
Now the only question that remains is whether those future share sales will come at higher or lower prices than today.
