Viking delivered solid gains on its NYSE debut on Wednesday even after aggressively upsizing its IPO by nearly 50% to US$1.5bn, underscoring the strength of long-only demand for larger offerings as the US new issue recovery takes hold.
Shares of the TPG-backed luxury cruise line rose 9% in their opening session, in line with an average return of about 10% from this year's crop of 28 US IPOs and more consistently positive opening performance from the listings of companies such as Centuri, Ibotta, Loar, PACS, Rubrik and UL Solutions in the past month.
Assuming exercise of the 15% greenshoe lifts proceeds to US$1.8bn, Viking would top sporting goods maker Amer Sports' US$1.57bn NYSE listing in February as the largest US new issue this year.
Bankers are readying several other US$1bn-plus offerings in the next few months, notably the potentially bigger IPO of cold storage warehouse REIT Lineage, to tap into growing investor confidence.
Vista Equity Partners-backed Solera Global also said on Wednesday it had filed confidentially for an IPO that could raise more than US$1bn.
On Tuesday, a syndicate led by Bank of America and JP Morgan priced the sale of 64m Viking shares at US$24 each, including 53m from sponsors TPG and Canada Pension Plan Investment Board, near the top of the US$21–$25 marketing range. The offering was upsized from 44m shares at launch to 53m a day ahead of pricing and by another 20% at pricing for an overall upsize of 46%.
Books closed north of 10 times covered on the upsized amount, a syndicate banker said. Allocations were heavily skewed to mutual funds/long-only investors, a pronounced feature of recent US IPOs. The top 10 accounts took 50% of the shares while the top 25 took more than 70%.
The material upsize appeared to curb early returns, though the shares still rose to US$26.10 in Wednesday's session before tacking on another 3% to US$26.99 on Thursday.
"We don't mind the slow glide path," one hedge fund investor said. "But honestly we were a little concerned by the magnitude of the upsize. Going from US$1bn to US$1.5bn is a lot different than going from US$300m to US$500m.
"Our concern was that investors would get their full allocations and would not show up in the aftermarket."
Viking also had to overcome a weaker broader market and pressure on cruise stocks after rival Norwegian Cruise Line disclosed on Wednesday that its first-quarter revenue missed analyst estimates.
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The IPO terms gave Viking a market cap of US$10.7bn, or US$14.6bn in enterprise value, versus adjusted Ebitda of US$1.1bn last year.
Viking was therefore able to secure a slight valuation premium based on EV/Ebitda multiples to the average of listed cruise lines Royal Caribbean, Carnival and Norwegian, reflecting its greater profitability, lower debt and faster recovery from the pandemic that shut down the industry for more than a year in 2020–21.
The upsize enabled TPG and CPPIB to make a bigger dent in their holdings, cutting their respective equal stakes to 15.2% from 21.9% and reducing the overhang.
The sponsors first invested US$500m in Viking in 2016 and contributed another US$500m in late 2020 during the pandemic.
Viking's major shareholder with a 52.2% post-IPO stake is founder Torstein Hagen, who did not sell shares in the offering. Viking issued 11m primary shares in the offering to help fund taxes on employee stock and for general corporate purposes.
The IPO also proved a big payday for Wall Street, which shared a US$76.9m underwriting fee on the base deal, around 5% of the proceeds.
JP Morgan, which was also stabilisation agent, took the largest chunk at about 35% ahead of Bank of America with 30%.