Crosstex Energy Shares Jump 29% in IPO
Crosstex Energy Inc. shares soared 30%, or $5.85, to $25.35 Tuesday in an initial day of trading on the Nasdaq National Market under the symbol XTXI. Dallas-based Crosstex, which owns and controls the general partner share of midstream operator Crosstex Energy LP with a 54% stake, priced the initial public offering of 2.3 million shares of common stock at $19.50.
While the small number of shares probably helped boost the offering price, Crosstex also may have benefited from a general lack of IPO competition by being scheduled in mid January. But the most significant factor in its success appears to be growing investor interest in the midstream gas sector.
Although Crosstex just launched its IPO, its history goes back to 1992 when it was named Ventana Natural Gas. The company was sold to Comstock Natural Gas in the early 1990s, and then CEO Barry Davis bought back the assets in 1996 to form Crosstex Energy.
With funding from Yorktown Partners in 2000 and the successful public sale in 2002 of master limited partnership Crosstex Energy LP, Crosstex Energy spent about $200 million on more than a dozen acquisitions to form its current network of 2,500 miles of gas gathering and transmission pipelines stretching across the Gulf Coast region of Texas, Mississippi and Alabama.
Crosstex Energy Partners LP went public in December 2002 at $20 and doubled its value reaching $43/share last month. Investors have been attracted by strong gas prices, fee-based operations in the midstream sector, master-limited partnerships and high dividend payouts. Crosstex's business model closely resembles that of its much larger peers, Kinder Morgan Energy Partners and Kinder Morgan Inc., which have performed exceptionally well.
A.G. Edwards & Sons Inc. acted as lead manager of the Crosstex IPO and Raymond James and RBC Capital Markets acted as co-managers. Crosstex has granted the underwriters a 30-day option to purchase up to 345,900 additional shares of common stock to cover over-allotments, if any, the proceeds of which would go to Crosstex.
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