A Breakthrough in the Coal Industry?
Earlier this week, Warrior Met Coal set the terms for its Initial Public Offering which is regarded the first filing and announcement of a company from the mining sector over the second quarter of 2017. Warrior Met Coal is a metallurgical coal producer set in
Administrators from the company announced on April 2nd that the price range for this mineral firm’s shares as going to be $17 – $19 for the company’s common stock. Additionally, the company plans to sell $16.7 million shares during the issuance. Underwriters will be able to access an additional 2.5 million shares under their overallotment option. In total, Warrior Met Coal plans to raise a revenue of $364.2 million from the new release.
Lead underwriters for the release of this coal producing company include Credit Suisse, BMO Capital Markets. Citigroup, Morgan Stanley and RBC Capital Markets. Further, Apollo Global Securities, Clarkson Platon Securities, and KKR will also oversee the firm’s issuance.
The company’s stock is set to appear on the New York Securities Exchange under the ticker “HCC.” According to its accounts, the company has decreased the revenue it has raised year over year. In the fiscal year 2015, the firm raised an adjusted revenue of $544.7 million. This figure was $174.3 million higher than its 2016 revenue that totaled to $369.0 million. However, the decrease in revenue has also come along with minimized loss, which means that the company could probably break even in the wake of its offering and begin to work towards higher profitability. Over the 2015 financial year, Warrior Met Coal accumulated losses of $310 million. However, losses dropped by more than 75 percent during the 2016 fiscal year when the company recorded losses of $64.4 million.
Notably, the firm will receive none of the funding from the issuance. All proceeds will instead go to the shareholders who are selling their equity. To some, this might come off as a bad sign since the losses from the previous year might not be covered. Timing has been critical on this firm’s offering. Over 2015, coal prices had dropped worldwide. This meant that coal producers were recording lesser revenue under the same cost of production, triggering losses. Further, President Trump’s election has played a part in brighter prospects for this company’s release as his policies have been significantly centered towards the improvement of energy production and the development of infrastructure. As such, most manufacturing industries, and as such energy producers, are set to benefit. Coal is the most widely used fuel globally. As such, demand is set to increase in the United States, which could further propel the firm’s stock to more significant improvements.
Warrior Met Coal is the largest coal producer in the Atlantic Basin and is amongst the top ten suppliers of the mineral in seaborne metallurgical coal markets across the world. In 2016, its mines produced 7.3 million tons of coal. Its high production enables it to enjoy a good position in global markets. The company’s offering could lead to potential investors taking more interest in the company’s working, thereby boosting its expansion to an even broader market globally. However, losses or drops in the industry could also adversely affect this firm.
For now, this is a considerably wait-and-see scenario. Proper management after the issuance will go a long way in the company’s success.