Shares of Verso Paper Corp. fell as much as 23 percent in their market debut Thursday, one day after the coated paper company cut the number and expected price of shares to be sold in its initial public offering.
The Memphis, Tenn.-based company offered 14 million shares at $12 apiece. Originally, the IPO was expected to total nearly 18.8 million shares and price between $16 and $18 each.
Shares opened at $10 and traded as low as $9.23 and as high as $12.01. Shares recently traded down $1.80, or 15 percent, to $10.20.
The company said it plans to use the $153.5 million in net proceeds to repay debt.
Verso was formed in August 2006 by affiliates of private equity firm Apollo Global Management LLC to buy out the coated and supercalendered paper division of International Paper Co. Apollo will retain a 67 percent interest in the company following the IPO. Supercalendered paper is smooth, thin paper typically used in magazines and catalogs.
The company's primary products are used in catalogs, magazines, annual reports, brochures, and retail inserts, and its customers include magazine publisher Conde Nast Publications, retailer and catalog merchant Sears Holdings Corp. and commercial printer RR Donnelley & Sons Co.
Verso operates 11 paper machines at four mills, which have a combined annual production capacity of 1.7 million tons of coated paper. Its main competitors include NewPage Corp., which announced plans for an IPO last week; Bowater Inc.; and Sappi Ltd.
Recently, rising input costs, higher energy prices and the stronger Canadian dollar have sparked plant closures, reducing North American capacity. With a reduced supply and a steady demand, Verso has been able to raise prices on its paper and said in its prospectus with the Securities and Exchange Commission that it expects paper prices to continue to increase through 2008.
Some analysts, however, were skeptical that rising prices would be enough to attract investors.
"In 2008, there are still some expected price increases, but the shortage in industry capacity won't last forever," Francis Gaskins, president of IPODesktop.com, wrote in a research note.
Also on Thursday, Verso said it swung to a profit in the first quarter, reporting income of $4 million on sales of $453.9 million. This compares with a loss of $29.9 million on revenue of $359.8 million in the same period last year.
Shares are trading on the New York Stock Exchange under the symbol "VRS."
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