Reuters: Global Markets: EQT Midstream rises in debut but investors still wary

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EQT Midstream rises in debut but investors still wary Jun 27th 2012, 15:26 By Tanya Agrawal Wed Jun 27, 2012 11:26am EDT (Reuters) - Shares of EQT Midstream Partners LP (EQM.N), a midstream vehicle formed by Appalachian natural gas producer EQT Corp (EQT.N), rose as much as 13 percent in their debut, as the market welcomed the first company to go public after more than a month-long IPO drought. EQT Midstream is the first company to go public in more than a month after concerns about Europe's debt crisis and Facebook Inc's (FB.O) botched market debut froze the U.S. IPO market. "The debut is a wonderful showing for the first IPO debut after the Facebook abyss was created. It is a strong indication for a change in the valuation models of the companies," IPOfinancial.com President David Menlow told Reuters. Facebook's decision to increase the size of the offering by 25 percent days ahead of its IPO and concerns regarding its lofty valuation have weighed on the performance of the stock, according to analysts. Some analysts though are not reading too much into EQT Midstream's strong showing. "The stock is a master limited partnership (MLP), which offers high yields and the company is in the Marcellus shale area, which is the best area to be in for a midstream company. I don't see Facebook and the Europe crisis having any effect on a company in this space," Jim Krapfel, analyst with Morningstar said. MLPs are favored by owners of cash-generating pipeline and other energy infrastructure assets because they pay virtually no corporate taxes, giving them a lower cost of capital and enabling them to distribute most of their profits to investors. LITMUS TEST Analysts are now waiting for high-profile enterprise software maker ServiceNow (NOW.N) to make its debut later this week to gauge the direction in which the IPO market is headed. "ServiceNow is a cloud-based service provider whose growth prospects are looking very good and is expected to price well. If this stock doesn't debut strongly, then the IPO market may be in some trouble for the rest of the year," Krapfel said. ServiceNow, which expects to price its shares at $15 to $17 each, hopes to raise $186 million. Morgan Stanley (MS.N) is leading the offering in its first IPO since the bank came under scrutiny after the Facebook deal. Exa Corp (EXA.O), which makes performance simulation software for vehicle manufacturers and biopharmaceutical company Tesaro Inc (TSRO.O) are also expected to set pricing terms this week. But while issuers appear to be dipping their toes back into the IPO market, it remains unclear whether investors will accept these deals. EQT Midstream sold 12.5 million common units for $21 each, at the top of its indicated price range, raising about $262 million. Citigroup, Barclays Capital, BofA Merrill Lynch, Credit Suisse, JP Morgan and Wells Fargo were joint book-running managers to the offering. Shares of the Pittsburgh, Pennsylvania-based company were up 12 percent at $23.47 on the New York Stock Exchange on Wednesday. (Reporting by Tanya Agrawal in Bangalore; Editing by Joyjeet Das, Supriya Kurane) Link this Share this Digg this Email Reprints

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