By Emily Ford
eford@salisburypost.com
David Murdock’s Dole Food Co. stumbled Friday during the company’s first day of public trading since 2003.
Murdock also owns the N.C. Research Campus, a new $1.5 billion life sciences complex in Kannapolis. The California billionaire spends about one week each month at his Rowan County home, Pity’s Sake Lodge.
Dole stock opened Friday morning at $12.45 a share on the New York Stock Exchange, below its initial public offering price of $12.50 and the company’s target price of $13 to $15.
The stock closed at $12.28.
Murdock, who still controls the company, took Dole public to raise money to pay off debt. One of the largest fruit and vegetable producers in the world, Dole has close to $2 billion in debt.
The poor showing likely was due to Murdock selling a private debt deal to qualified investors just as the common stock was priced, said John Fitzgibbon, the founder of IPOScoop. com, a New Jersey-based initial public offering rating service.
“Out of the blue came a curve ball,” Fitzgibbon said. “It spooked everybody.”
In an unusual move earlier this week, Murdock priced a $300 million mandatory convertible bond offering at the same time as the initial public stock offering, Fitzgibbon said.
“The $300 million convertible offering dropped on top of it, and it basically squashed the deal,” he said.
Convertible debt is a loan that can convert to equity under certain circumstances, usually when the lender says so.
Dole’s return to the marketplace started out well, with Jim Kramer, host of CNBC’s Mad Money, recommending the stock.
Then analysts learned of the simultaneous private debt sale and started lowering Dole’s IPO rating.
The company cut the stock price to $12.50, “acknowledging there was a problem,” Fitzgibbon said. “It dropped from there.”
The disappointing sale doesn’t mean much to the company, which will remain large and viable, Fitzgibbon said.
“To the new shareholders, I’m sure there is a bit of a disappointment,” he said.
Nothing happens during the required 45-day cooling off period after an initial public offering. Then, the company can talk about its future outlook and bankers can issue research reports and recommendations to try to boost the stock price.
Dole’s deal was managed by Goldman Sachs Group Inc., Bank of America Merrill Lynch, Deutsche Bank AG and Wells Fargo.
As part of a corporate restructuring connected to the public offering, Dole assumed $115 million of debt that Murdock accrued while building and operating a luxury hotel and wellness center in California.
Murdock and his affiliates “will be in a more favorable financial position upon completion of these transactions than they were before such transactions,” Dole wrote in documents filed before the sale with the Securities and Exchange Commission.
Murdock’s substantial investment in the Research Campus did not necessitate the Dole sale, Lynne Scott Safrit, president of campus developer Castle & Cooke North Carolina, has told the Post.
Dole’s IPO wasn’t the only public offering to falter this week on an opening day.
Chinese cable equipment maker ZST Digital Networks Inc. ended its first day of trading down 6 percent, and medical device maker AGA Medical Holdings Inc. ended its first day unchanged.