Potash miner soars as farmers, and the rest of us, pay up

Fertilizer producer Intrepid Potash Inc. lived up to its billing in its stock debut today: The shares, priced at $32 in their initial offering on Monday, rocketed to close at $50.40 on the New York Stock Exchange, for a one-day gain of 58%.

By contrast, the average first-day pop for IPOs in 2008 is 10%, down from 13% last year, according to data tracker ipohome.com. Among other recent deals, credit-card processor Visa Inc. jumped 28% on its first day of trading March 19.

Potash (potassium) is a critical crop fertilizer that improves the hardiness of plants, including their ability to withstand drought and parasites. With farmers worldwide planting fence row to fence row to meet global food (and ethanol) demand, the relative handful of large-scale potash producers can charge top-dollar for the stuff -- which, in turn, we're all paying for at the grocery store.

Denver-based Intrepid earned $18.6 million last year (adjusted for taxes) on sales of $213 million. That works out to a profit of only about 25 cents a share on the now-75 million shares outstanding. So at today’s lofty closing price the stock clearly is a bet on a continuing global agribusiness boom -- and much fatter per-share results for Intrepid.

Matt Therian, an analyst at ipohome.com in Greenwich, Conn., says Intrepid’s big draw for investors is the proximity of its major mines to Great Plains and Midwest farms. "Where they produce is where they sell their potash," he says. That gives the company an advantage over Canadian competitors.

As Intrepid notes in its stock prospectus, "We are the largest producer of potash in the U.S., the second-largest potash consuming country in the world." For Wall Street, that was 'nuff said.

Next up on the IPO stage: Digital Domain Inc., a Hollywood special-effects studio. The company’s underwriters expect to price the deal on Wednesday. More on that offering here and here.

Photo: Intrepid's potash mine near Moab, Utah.

Posted April 22, 2008