Delphi Automotive Aiming for $578 Million

Troy, Michigan-based automotive parts company Delphi Automotive will make its initial public offering next week, and it is aiming to raise $578 million. According to

Crain's Detroit Business

, “Delphi will offer 24.1 million shares at $22 to $24 each, according to a filing today with the U.S. Securities and Exchange Commission. Underwriters including Goldman Sachs and JPMorgan Chase & Co. have the option to buy and sell as many as 3.61 million additional shares, the filing said.” Delphi was founded in 1997, and it is one of the world's largest automotive parts manufacturers, with around 146,600 employees worldwide and 150 manufacturing sites. It has been a steady but sure build for Delphi, and things are certainly looking positive as they move towards becoming a publicly traded company. According to Crains writer Dustin Walsh, “The New York City-based hedge fund Paulson & Co., the largest shareholder in Delphi, looks to cash in a portion of its stake, selling 20.6 million of its 72.3 million shares. Paulson stands to rake in as much as $350 million from the IPO. Paulson's ownership stake will be reduced to 15.8 percent from 22 percent.” The company's current valuation is approximately $7.6 billion given outstanding shares and IPO pricing. Its Morningstar fair-value estimate is $9.1 billion. While operations headquarters will remain in Troy, a boost for Michigan, the new public headquarters will be in the UK. The stroy is all more impressive when considering that Delphi filed for bankruptcy in 2005, emerging four years later and going from strength to strength.

ACTION ITEMS:

Bullish:

Traders who believe that Delphi will thrive in the trading environment might want to consider the following trades:

For twelve years, Delphi has been well managed and has climbed steadily. There's no reason why that would stop now.

Bearish:

Traders who believe that Delphi is due for a struggle may consider alternate positions:

It's a different world out there for publicly traded companies. This would represent a step into the unknown.

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