Forgent Power Solutions raised US$1.5bn late Wednesday from an NYSE IPO that was heavily oversubscribed, though the lead banks were reluctant to push too hard on pricing.
Goldman Sachs, Jefferies and Morgan Stanley priced 56m shares at US$27.00, the midpoint of the US$25–$29 marketing range. The banks held discussions about pricing in the upper half of that range given a book of demand that was north of 15x covered.
“There was some talk (about higher pricing),” said one banker involved in the offering. “While it is always important for stocks to trade well in the aftermarket, there has been concern over the performance of recent IPOs.”
The top 10 investors took down about half of the Forgent offering and the top 25 three-quarters, the banker said.
Forgent was trading on debut midday Thursday at US$27.84, 3% above offer.
At pricing, the maker of electrical distribution equipment fetched an enterprise value of US$8.6bn, a lofty 16x multiple of expected Ebitda for calendar year 2027. That compares to the 20.2x multiple at which Vertiv currently trades.
Forgent's products are vital to the construction of data centers for AI, the expansion and upgrade of the US electric grid and the onshoring of manufacturing – three capital-intensive trends currently driving massive fundraising across equity and debt markets.
The Minnesota-based company's fast growth saw its backlog swell by nearly 50% in Q4 to US$1.5bn as of December 31, from US$1.02bn as of September 30 – with a book-to-bill ratio of 2.6x. Nearly 40% of that growth was from first-time customers such as Brookfield Renewable Energy and California utility PG&E, management outlined in the roadshow presentation.
Forgent generated about US$210m of adjusted of adjusted Ebitda in the trailing 12 months ended December 31 on revenue of US$845m, including top-line growth in the last six months of 2025 by 73.8% to US$565m–$580m based on preliminary results.
That 16x multiple projects Ebitda will grow to about US$520m in 2027 – more than doubling from the current results.
Neos Partners, the San Diego, California-based PE firm that cobbled together Forgent through a string of acquisitions, deserves a lot of credit.
AI wobble
Under the PE firm’s stewardship, Forgent has spent US$205m over the past 18 months to build five manufacturing facilities, strategically located in regions of heavy spending on data center construction. Those facilities allow it to make highly customized electrical gear and speed delivery to customers.
Neos reduced its stake to 81.6% through the sale of 16.6m shares in the IPO and the repurchase of another 39.4m with proceeds from the offering (synthetic secondary).
The Forgent share sale comes on the heels of industrial rental equipment provider EquipmentShare’s US$747m Nasdaq IPO. That stock soared 32.9% on debut in late January and closed Wednesday's session at US$34.21 – 39.6% above offer.
There are some concerns that AI spending and financial forecasts for the ecosystem are overly rosy.
“There has been a shift in the narrative over everything AI being up and to the right,” said one hedge fund manager who put in for the Forgent IPO. “The recent gyrations in the public markets have been wild.
“The concern is that a lot of investors become more focused on managing their existing positions and become hesitant to take on new positions.”
Alphabet shares plunged 4.3% Thursday to US$318.85 after it announced plans to spend US$175bn–$185bn on capex this year, more than double what it spent in 2025. On the Q4 earnings call, CFO Anat Ashkenazi said the spending will support AI compute capacity for Google DeepMind, Google Cloud and other strategic initiatives.
Software stocks have also been pressured after privately held AI generator Anthropic on Monday rolled out a new suite of tools – the iShares software ETF (IGV), a closely watched barometer, is down some 10% this week alone.
The performance of recent IPOs has been disappointing.
Crypto custodian provider BitGo is down 40.2% from its IPO priced late last month. Brazilian fintech PicPay (–15.4%), defense contractor York Space Systems (–31.2%) and life-insurance focused fintech Ethos Technologies (–35.5%) are other recent disappointments.