Genworth Falls After Delaying Mortgage IPO on Volatility

Max Reyes

14 May 2021, 04:22 AM IST

(Bloomberg) -- Genworth Financial Inc. shares declined after the company postponed a planned initial public offering for its Enact Holdings Inc. unit, citing volatility in the mortgage-insurance market.

The IPO, which was expected to raise as much as $623 million, would have been this week’s largest U.S. initial offering. Genworth dropped as much as 5.2% in New York before rebounding to $3.86 at 1:08 p.m., a 0.3% increase.

The decision to put the sale on hold follows last month’s collapse of a takeover agreement Genworth had reached with China Oceanwide Holdings Group Co. Taking the mortgage-insurance business public was initially floated as part of a plan to help pay near-term debt as progress on the merger dragged on for more than four years.

“Genworth does ultimately need the cash,” Jeffrey Flynn, an analyst with Bloomberg Intelligence, said in an email. “So there is some pressure on them to get it done.” But Flynn said the company’s cash position is “workable,” and a delay might ultimately help if an improving housing market boosts second-quarter results at Enact.

Genworth’s ability to meet its obligations isn’t dependent on the IPO, the company said Thursday in a statement. The Richmond, Virginia-based firm said it had about $757 million in cash and liquid assets as of March 31.

“In light of the recent significant trading volatility in the mortgage-insurance sector, Genworth’s board of directors determined that current market pricing for the planned offering does not accurately reflect Enact’s value,” Chief Executive Officer Tom McInerney said in the statement. “Therefore, we have decided to postpone the IPO and will continue to evaluate our options as market conditions develop.”

The delay followed other recent stumbles in the market. An IPO from the Fortegra Group was withdrawn hours before it was expected to start trading on April 29, with parent Tiptree Inc. also citing adverse market conditions. On May 6, James River Group Holdings Ltd. priced a secondary offering at the sector’s steepest discount ever after adjusting its expected value of outstanding insurance claims. The next day, Chinese insurance-tech firm Waterdrop Inc. tumbled almost 20% from its IPO price in its U.S. market debut.