Saturday, December 12, 2009

Cobalt International Energy IPO Slated for Dec. 15

The Carlyle Group hasn't seen a joyful Christmas since President Bush and Congress approved their buyout of ManorCare on December 22, 2007. Co-founder David Rubenstein advised investing in health care and energy at last week's BisNow breakfast. The public gets their chance to buy shares of Cobalt International Energy this Tuesday.

Cobalt filed for the IPO in September, but waited for better market conditions. The holiday mood might be just the trick. As for who's selling, Reuters reported:

The company was formed by funds affiliated with Goldman Sachs & Co., and private equity firms Riverstone Holdings LLC and The Carlyle Group.

Riverstone Holdings, the Carlyle Group and Riverstone's co-founder paid a combined $70 million to make a New York state pension investigation go away. They might need cash.

What can people buy in the energy sector? Bloomberg reported aspects of the deal:

1. asking investors to pay more than $1 billion for a deepwater-oil explorer with no revenue or profits

2. plan to offer 63 million shares at $15 to $17 each

3. Cobalt’s IPO will show whether investors are willing to pay 61 percent more than the median U.S. oil explorer’s so-called tangible net assets for a company that doesn’t expect to generate any revenue from oil production for at least two more years.

It looks like a premium priced bet. Welcome to the new world of finance. Wall Street or Vegas? The odds may be similar, stacked in the house's favor.