The IPO Buzz: An IPO Wet Blanket

The Nasdaq Composite topped out on Sept. 14, closing at 3,183.95. Slightly more than two months later, it closed on Friday, Nov. 16, at 2,853.13, DOWN 10.4 percent. Some might consider that the Nasdaq Composite Index has slipped into a correction phase.(A 10 percent pullback from a previous high is generally considered a correction.) But there is no reason to hit the panic button. Earlier this year, the Nasdaq Composite did the same – moving into a correction, but the other major stock markets indexes did not.

 

Consider the following: From April 2 through June 1, 2012, the Dow Jones Industrial Average fell 8.63 percent and the S&P 500 Index lost 9.94 percent – close to a correction, but no cigar. This time around, the Dow has dropped 7.42 percent from its Sept. 20 closing high, and the S&P 500 has fallen 7.22 percent from its closing high on Sept. 14. We’ll have to keep our fingers crossed for a turnaround.

 

Last week’s major disappointment came in the form of Ruckus Wireless (RKUS), a Sunnyvale, California-based provider of carrier-class Wi-Fi solutions. Ruckus priced its IPO of 8.4 million shares at $15 each on Thursday evening. That was on the high end of its price range of $13 to $15 per share.

 

The talk – the color – was that Ruckus was well oversubscribed. The consensus of Wall Street professionals was for a good opening-day pop. Nevertheless, there were a couple of doubters, citing stock market conditions. In the end, stock market conditions overruled the color.

 

On Friday morning, Ruckus opened unchanged at $15 and tanked. It closed at $12.25, DOWN 18.3 percent from its initial offering price.   

 

That brings us to this week’s IPO calendar, which offers just two deals. One comes from a popular sector – limited partnerships (LPs). The other is from an almost forgotten sector – China.

Alon USA Partners, LP plans to price 10 million common units at $19 to $21 each on Monday evening. The IPO is expected to start trading on Tuesday morning on the New York Stock Exchange under the proposed symbol “ALDW.” The joint-lead managers are Goldman Sachs, Credit Suisse and Citigroup. The co-managers are Jefferies, Macquarie Capital and Tudor, Pickering, Holt.

 

Based in Dallas, Alon USA Partners is a limited partnership formed by Alon USA Energy (ALJ) to own, operate and grow its refining and petroleum products marketing business. The company’s downstream business operates primarily in the South Central and Southwestern regions of the United States. It owns and operates a crude oil refinery in Big Spring, Texas.

 

Note: The company’s board of directors has not declared a cash distribution.

 

The last Chinese IPO offered in the U.S. capital markets was Vipshop Holdings Ltd. (VIP), one of China’s leading online discount retailers. Vipshop offered 11 million American Depositary Shares (ADS) at $6.50 each on March 22, 2012. That was below its original filing of 11.2 million ADS at $8.50 to $10.50 each. The IPO closed its opening day of trading at $5.50 per share, down 15.4 percent from its IPO price. Fast forward to Friday, Nov. 16, when Vipshop closed at $11.41 – UP 75.5 percent from its initial offering price.

 

This brings us to the present.

 

YY Inc. plans to price 7.8 million ADS at $10.50 to $12.50 each on Tuesday evening. The IPO is expected to start trading on Wednesday morning on the NASDAQ Global Market under the proposed symbol “YY.” The joint-lead managers are Morgan Stanley, Deutsche Bank Securities and Citigroup. The co-managers are Pacific Crest Securities and Piper Jaffray.

 

Based in Guangzhou, China, YY offers a social platform that engages users in real-time online group activities such as games, live concerts or personal tutoring through voice, text and video. YY launched its core product in China in July 2008. It has attracted about 400.5 million registered user accounts as of Sept. 30, 2012, according to its prospectus.

 

By noon on Wednesday, Wall Street will probably resemble a ghost town – with most of its denizens cutting the day short to take off to grandma’s house or perhaps a long weekend of golf in Bermuda. Happy Thanksgiving to all!