NCS Multistage IPO Shadowed by Ongoing Oil Glut

NCS Multistage (Pending on NASDAQ: NCSM) is a US-based oil-producing company with headquarters in Houston, Texas. Founded in 2006 by Robert Nipper, the company is one of the most successful in the American oil industry, with over 100,000 patents about fracking intellectual properties. NCS Multistage advises other oil-dredging firms on the best ways to conduct fracking on oilfields for maximum oil production.

On any other company, an increased revenue stream of over 100 percent in the past two years would have drawn positive reactions from investors. Indeed, NCS Multistage increased its revenue from $23.1 million in the first quarter of 2015 to an estimated $58 million midpoint during a similar period in 2016. To say that the increased income is anything but significant would be an understatement. However, that does not seem to factor in with investors’ minds after the company announced its debut IPO.

NCS Multistage plans to sell off 9.5 million of its common shares during the week that runs from April 24th, 2017. With each share going at a price range of $15 to $18 per share, the firm hopes to raise at least $157 million. Selling off shares within that spectrum will allow NCS Multistage to consolidate in a market capital value of $783 million at best and $747 million at worst as an approximate 45.3 million common shares will remain afloat.

The lead managers of the IPO will work jointly and will include Wells Fargo Securities, JP Morgan, Credit Suisse, Citi Bank, Raymond James, RBC Capital Markets, Tudor Pickering Holdings as well as Simmons & Co.

The initial share issuance of the oil giant corporation should have been well received for a company that brought in $98 million in revenue last year. But with the oil market moving up and down like it is now, investors think that it’s just wiser to steer clear of the IPO.

The OPEC nations have, in recent years, been maximizing their output by producing vast amounts of oil per year. Saudi Arabia alone, in fact, produced billions of barrels that unfortunately led to the saturation the world market. Developing countries are growing slowly, and subsequently, their industries are doing the same. Developed nations are investing millions in the pursuit of obtaining sustainable and renewable energy. As a result, petroleum energy global demand has been on the decline and the oil produced has become surplus, so oil prices have taken a dive this year. This unstable environment has wreaked its fair share of havoc on oil companies, and the same goes for NCS Multistage.

NCS Mulitstage didn’t say what it was going to do with the money. From the looks of things though, the money will most likely be used to recoup its losses. Investors are still wary about placing their money on what is typically not a safe bet because the success of the IPO is in question. Things are not all negative, however. With the quotas being placed on oil production by OPEC, oil prices are on their way to stabilizing. It seems that now might be the time to buy shares from Multistage if you’re a long-term profit kind of investor.