Early financial backers of BrightView Holdings (NYSE:BV), are likely tearing their hair out after the landscaping company endured a brutal day on the market during its IPO. The commercial landscaper BrightView ultimately priced its shares at the lower end of its expected range, and failed to accumulate the roughly $500 million it was hoping to generate during its market debut. While the company remains the largest provider of commercial landscaping services in the nation, many in the market are beginning to whisper about its lackluster performance.
These are the key details behind BrightView Holdings’ IPO, and what the company is doing to make up for its rough market debut.
Pricing at the low end of the range
The easiest way to describe how bad BrightView Holdings’ IPO was is merely to note that it was priced at the lower end of its expected range, with the company offering investors some 21.3 million shares at $22 apiece. It had originally expected to offer shares at a range of $22 to $25 each, so while the end results weren’t terrible for the company, they don’t exactly inspire confidence in the landscaping behemoth. BrightView ultimately raised roughly $469 million in its market debut, though the lawn care experts were hoping to gleam some $500 million from their IPO.
Will that difference mean investors abandon BrightView Holdings in droves? That’s not very likely – after all, it remains the largest commercial landscaper in the United States, an impressive title with serious potential that many investors will refuse to ignore. With Americans eager to spend huge sums of cash on lawn care and landscaping, too, it seems fair to assert that BrightView Holdings still has plenty of potential – after all, consumers in North America spend more than a whopping $40 billion each year on their lawns, according to some reports.
So, why weren’t investors sold on BrightView Holdings? After all, the company made industry headlines when it filed for its debut, and it’s a total behemoth in its industry – BrightView Holdings actually has revenues that are more than 10 times those of its next largest competitor, for instance. Last year, the company brought in some $2.3 billion in net revenue, according to its prospectus, and it boast a contract renewal rate of approximately 85 percent. Despite all of this, however, BrightView Holdings is still suffering from some serious debt problems.
According to filings made with the SEC, the company owes quite a chunk of change to debtors, including a signal boosters company; BrightView Holdings has over $1.6 billion in debt as of March 31, 2018, and saw its IPO primarily as a means to drum up funds to help pay those debts down. Given that the company failed to beat expectations, and indeed had a rather sour debut, it’s now fair to say that its ability to pay off future debts can be called into question by hesitant investors.
BrightView is still chugging ahead
Despite the relatively poor performance of its stock during its market debut, BrightView Holdings is still charging forward at full speed. After all, as BrightView’s CEO Andrew Masterman noted, the grass will always continue to grow despite the strength of the economy, and Americans are truly in love with landscaping. Does that kind of logic really hold up under scrutiny, however?
When the market tanks, for instance, most everyday Americans aren’t going on spending sprees – while we’re currently seeing a roaring market, future recessions could seriously cut back on the amount of revenue BrightView can reap in by convincing homeowners around the nation to rely on its services. While the company boasts a rather solid contract renewal rate, the heavy debt figures it’s going to be dealing with after its market debut is going to keep dragging down its prospects for some time.
BrightView’s prospectus also makes it clear that it’s entrapped in a slow-growth industry; Americans may love spending time and money on their lawns, but the overall landscaping industry isn’t exactly known for its booms. Thus, those hoping that BrightView Holdings may alleviate its existing debt concerns with near-term boosts in revenue are likely kidding themselves. If the company wants to pay off its debt, it needs to start getting creative with how it handles its assets. With some 22,000 employees and the greatest landscaping reputation in North America, it’s safe to say that BrightView Holdings isn’t going anywhere anytime soon. Nonetheless, the truly lackluster performance put in by the company during its market debut is seriously going to shackle it, particularly as investors anxious about the company’s debt see it continue to spiral into the red. A less than ideal IPO doesn’t always spell the death of a company, of course, but landscaping giant BrightView Holdings has quite a bit on its plate if it wants to recover from its slovenly market debut.