RailAmerica Debuts - Analyst Blog

Following the closure of its initial public offering (IPO), RailAmerica has started trading under the ticker symbol “RA” on New York Stock Exchange since Tuesday.

RailAmerica, which filed for IPO in late July, had offered 10.5 million primary shares and 11.5 million secondary shares priced at $15 per share last week. It had expected them to price for between $16 and $18. The company intends to use the proceeds of $144 million from issuing 10.5 million primary shares for paying off debt and other corporate purposes.

The shares, which started trading on Tuesday, fell by approximately 8.2%. A number of private equity companies that unloaded their portfolio companies recently have realized gains less than expected.

Rail America is a portfolio company that was bought by Fortress Investment Group in February 2007 for $640 million. Fortress still retains 55.8% of the stock after the IPO. It has realizes a gain of 27% on its investment in RailAmerica.

J.P. Morgan Securities Inc. (JPM)., Citigroup Global Markets Inc. (C) , Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc. (MS) represented the underwriters.

RailAmerica transports coal, lumber and forest products, in addition to chemicals, and agricultural products and operates 40 short-line railroads in 27 U.S. states and Canada. RailAmerica earned $206.4 million in revenue during the first six months of 2009, a decrease of 19% from the same period in 2008. In the midst of the global recession the company has made efforts to cut costs which have helped RailAmerica’s profit margin and rail transportation volumes to recover.