IPO Spotlight: MSCI

Wall Street closed last week with a large drop after major banks warned of further losses on their debt portfolios, stoking investor concerns that credit market weakness is rattling the economy.

Kathleen Shelton Smith, principal of Renaissance Capital, which operates IPOhome.com., said MSCI's business has performed well, even during turbulent markets.

MSCI provides a number of investment decision-support tools, including the MSCI indices and the Barra portfolio risk analytics, to help investors analyze and manage risk. The company has more than 2,900 clients across 63 countries, including the 25 largest asset-management firms globally.

MSCI plans to offer 14 million shares of Class A common stock at an offering price of $14 to $16 per share.

"It's a play on the growth of ETFs, the growth of international investments and the need for both performance measurement and analytics." said Shelton Smith. ETF is shorthand for exchange traded fund, a security similar to an index fund that trades like a stock.

Scott Sweet, the managing director of research firm IPO Boutique, said MSCI's earnings and sales are "excellent" and that the company is well regarded.

For the nine months ended Aug. 31, MSCI's earnings rose 13 percent to $62.9 million, from $55.8 million in the year-ago period. Operating revenue grew 17 percent to $268.2 million during the same period.

"It's the type of company that generally would do well in a good market environment," Sweet said. But Sweet said broader market turmoil has added a note of uncertainty to even the best deals.

William Wilson, an analyst with research firm MorningNotes.com, agreed that the IPO market is softening. "I think with the recent turn in the market, investors attitudes have changed," Wilson said. He noted that investors are turning away from speculative buying and looking to companies with strong operating histories.

Wilson said MSCI's subscription-based revenue stream may appeal to investors under these conditions.

Shelton Smith noted that an added uncertainty surrounding MSCI's offering is Morgan Stanley's ownership and the possibility that the investment bank will unload its stake in the company.

After the IPO, Morgan Stanley will own about 97 percent of MSCI's outstanding Class B stock, representing about 93 percent of the shares' combined voting power.

In its prospectus, MSCI warned investors that Morgan Stanley may sell part or all of its stake in the company, or may completely divest its ownership through a tax-free spin-off.

Shelton Smith said uncertainty surrounding MSCI's ownership may make some investors nervous, but overall the IPO is a good bet. "The market is getting a little dicey, so only the really strong companies are going to get done when the market gets like this," said Shelton Smith. "This looks like one that's going to get done."

Morgan Stanley, Banc of America Securities, Credit Suisse Securities, Merrill Lynch and UBS Securities are underwriting the deal. MSCI has also granted the underwriters the option to buy up to 2.1 million additional shares of Class A stock to cover any overallotments.

MSCI plans to list its shares on the New York Stock Exchange under the symbol "MXB."