Swift lesson in how IPOs should work

Going public turned Swift Transportation from a family business into a growth company favored by institutions.

By TheStreet Staff Jun 6, 2013 2:57PM

thestreet log Truck drivers copyright Exactostock , SuperStock, SuperStockBy Dana Blankenhorn

 

When we write about IPOs, we usually focus on the stock. What did the stock do its first day? Who got rich off their holdings in the stock?

 

But an IPO isn't about the stock. It's about the money. A company wants to raise money, and it has a reason to raise that money. The money is supposed to make the business grow.

 

There were 41 companies that went through an IPO in the fourth quarter of 2010. Some were immense, like General Motors (GM). Others quickly became "story stocks," such as Sodastream (SODA).

 

Of those 41 companies, according to Hoover's, 23 now sell for less than the offer price, and one, Chinese leather company Lizhan Environmental (LZENF: OTC), said it would delist last October and is now worth 1 cent a share.

 

But if you bought and held Swift Transportation (SWFT) at its December opening, you now have a good investment. 


The offering raised $806.3 million at $11 a share. These shares recently have traded around $17. The company is profitable, earning $23.34 million in the March quarter, against earnings of $6.19 million in the same quarter a year ago.

 

Phoenix-based Swift is the largest trucking company in the U.S., with more than 16,000 trucks. Its shares were recently upgraded here at TheStreet. Our ratings staff noted that cash flow is up, and that the stock is up 86% since the start of the year. Swift's debt-to-assets ratio is now just 50%.

 

Swift might be better called Moyes Trucking. As Wikipedia notes, the company was the creation of trucker Carl Moyes, who once worked for C.R. England.

 

The company adopted the Swift name when it purchased the trucking assets of the Swift meat-packing company.

 

Carl's son Jerry Moyes built the company. He first took it public in 1990, then did a leveraged buyout in 2006, at $29 a share. The Great Recession was tough on Swift -- its head count dropped nearly 20% -- and it is now 98.5% owned by institutions, although Moyes himself also owns other trucking operations, according to the company's S-1.

 

What makes Swift a growth stock is its position at the borders. It owns a large Mexican carrier, Trans-Mex, and offers crossing services at all major Mexican gateways. It also has a presence in every Canadian province.

 

Jerry Moyes, now 69, still works as CEO, and Reuters says he earned $1.44 million in the most recent year. The president is Richard Stocking, 42, who has spent his career with the company.

 

What you have, at the end of the day, is a company favored by institutions, with a stable management team and a clear transition in place, one that benefits enormously from cross-border trade across North America. 


Going public turned Swift from a family business into an institution, and a favorite investment of institutions. That is what an IPO is supposed to do.

 

At the time of publication, the author had no investments in companies mentioned here.

 

 

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