The second times a charm for
Dice Holdings
(NYSE:DHX) who went public again yesterday after emerging from its 2004
bankruptcy. The website operator raised $217 million after it priced at
$13/share - the top of its expected range. The IPO was especially
rewarding for the company's two private equity backers, General
Atlantic and Quatrangle Group, who stand to make roughly 2.7x their
money in two years. Meanwhile, some investors remain skeptical as to
the long-term viability of the company.
Dice Holdings initially
went public back in 1998 at the peak of the dot-com boom only to end up
in bankruptcy courts five years later. Since then the company has
improved substantially with $83.7 million in revenues in 2006 compared
to $32.2 million in 2004. The company plans to use the proceeds from
its second more successful IPO to pay off more than $190 million in
debt and fund general business expenses.
The real story,
however, is in the private equity funds that successfully executed a
bankruptcy play. The two funds formed Dice Holdings in August of 2005
and bought the company for pennies on the dollar - $138.6 million.
Amazingly, they recouped most of this cost in a $107.9 million dividend
payout in March. This means they are still holding shares at an
adjusted purchase price of just over $18 million, putting their cost
per share at around 40 cents! Perhaps this is something to consider the
next time a private equity fund makes a bid for one of your stocks that
seems to be underperforming in the short-term...
In the end, the
long-term viability of Dice remains uncertain as their primary business
is in their employment portal, Dice.com. Ideally, the company will be
able to use these proceeds to pay off its debts and build itself into a
cash cow that may be attractive to other larger employment portals like
Monster.com (NDAQ:MNST) or even some technology-related newspapers. Combined, these factors make DHX a stock
worth watching!