Member and Industry News

March 10, 2011

HCA’s big day (

HCA’s big day (
by Erin Lawley, Geert De Lombaerde | Mar 10, 2011

When legislators passed a massive health care reform package a year ago, many conversations quickly turned to the public-market prospects of HCA, which had been taken private in 2006. After several twists and turns – the most notable being a November reorganization that paid the company’s private-equity owners a $2 billion dividend – the day has arrived for HCA to resume its place on the Big Board.

On this page, we’ll track the day’s events and commentary, adding new items to the top of the page as they come in. We expect to find plenty to relay to you about this $3.8 billion IPO – which, by the way, is Middle Tennessee’s fifth in the past 19 months – and we hope you’ll check back regularly through the day.

5:53 p.m. Let’s end the day on skeptical note, shall we? David Whelan at Forbes contends HCA needs to catch up to the economic and political realities of the health care sector. Being “integrated” in an old-school way won’t get the company far in the days ahead, when accountable care organizations and medical homes will become key to getting paid properly. A big part of those concepts is owning your own physicians, something HCA does not do much.

4:15 p.m. The final numbers from today’s trading: $31.02, up 3.4 percent from the initial price with 64.6 million shares changing hands.

2:06 p.m. A number of market players – likely including several who haven’t gotten in today – already are looking ahead to future offerings of HCA shares. Barron’s pointed out last weekend that more than 380 million additional shares will become eligible for resale in mid-September, which will put pressure on the stock price. Also, Scott Sweet of IPO Boutique says the IPO doesn’t give HCA the resources to pay down big chunks of its debt. That, he says, will require several secondaries.

12:30 p.m. Investors appear to have settled on their price for the day. For the past 90 minutes, HCA has traded in a range between $31.10 and $31.20. More than 50 million shares have changed hands so far, almost 10 percent of the company’s total amount outstanding.

11:20 a.m. Industry experts expected the health care services sector would get a collective boost from HCA’s IPO, but today’s ugly market conditions indicate the hospital giant can only help itself. All three major stock indexes have tumbled today on disappointing economic news, including a rise in initial U.S. jobless claims. The hospital stocks – CHS, Tenet, LifePoint, UHS and HMA – have followed the downward trend. The fact that HCA’s shares continue to trade in the $31 range illustrates the demand for shares was much larger than the number of shares offered.

10:09 a.m. HCA’s private equity backers and management team aren’t the only ones benefiting from the company’s return to the New York Stock Exchange. An estimated 1,400 HCA employees received equity in the company when it went private in a $33 billion leveraged buyout in 2006, translating to cash in the pockets of those who may want to start their own companies or fund other local entrepreneurs. For more on the potential trickle-down effect, check out the stories this week from WPLN and The Tennessean.

9:50 a.m. Could a newly public HCA may turn into a major acquirer? CNBC cites industry analysts who think the company may want to get in the ring with Community Health Systems in its battle to take over Tenet Healthcare.

9:12 a.m. Shares are now trading and opened well above $31 before retreating a bit. Still, they’re up 3 percent, another sign of the strong demand that led to yesterday’s talk of pushing up the price. Check out the price action here.

8:55 a.m. HCA now has a little more than 515 million shares outstanding. At $30 per share, that makes for a market capitalization of $15.46 billion. By way of comparison, that’s 2.7 times the combined market cap of Community Health Systems and LifePoint Hospitals, the No. 2 and 3 publicly traded hospital companies based in Middle Tennessee. It’s also more than the combined value of local heavyweights Dollar General, Tractor Supply and Gaylord Entertainment.

7:33 a.m. Speculation Wednesday afternoon that HCA might look to push the offering price to $31 turned out to be off the mark, but one market watcher points out the total number of shares sold by the company’s investors rose from the expected 124 million to 126.2 million. The 2.2 million difference came from the company’s investors alone.

7:21 a.m. HCA is the 55th company or fund to go public on the New York Stock Exchange or the NYSE Arca this year. The ones who came before it – going back to 2002 – are all here.

7:08 a.m. For the record, here’s the company’s official release announcing the pricing of its record-setting offering. This Bloomberg piece nicely sums up the background to HCA’s third IPO.

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