Know Your IPO: Intrepid Potash

If there’s one business out there that has been a consistent winner, one that also happens to be a great green play, it’s agriculture. Cramer’s top three ag stocks – Potash Potash Corp of Saskatchewan Inc POT, Mosaic MOS and Agrium AGU
– are up an average of 643% since he first got behind all three back in October of 2005. Agribusiness is a long-term theme, he said on Monday’s show. In particular, fertilizer stocks have been a great way to play this bull market thanks to demand outpacing supply and thus leading to higher prices.

That’s why Cramer is now getting behind Intrepid Potash, a fertilizer IPO set to price on Friday that is 100% levered to potash, a crucial component of fertilizer. The world’s largest potash producer, POT, is only one-third potash despite its name. IPI will be the first Western pure play on the substance and it just so happens to have much lower production costs than POT.

IPI’s public offering is being underwritten by Goldman Sachs, Merrill Lynch and Morgan Stanley, among others. That typically means it will get sponsorship from those firms – and that is likely to be a boon for the stock. If you can, give these brokers some commission to get in on the deal, Cramer recommended.

IPI is planning on using the majority of the proceeds from the offering to buy a mining company owned by its founders, a little bit of self-dealing that Cramer doesn’t mind too much because of the his bullish stance on potash. The rest of the cash that’s generating will be used to pay off debt and production expenses.

Cramer would try to get in on the ground floor of this IPO but said that, for those who can’t, they can still buy the stock in the after market as long as it doesn’t get any more expensive than $34, a price he got by predicting its earnings multiple based on what he thinks it's premium will be to POT.

The ag bull market is here to stay, as far as Cramer is concerned. Ride it higher with IPI.