The IPO Buzz: Double Whammies and a Drought

The most obvious whammy was the Facebook (FB) train wreck. Nobody expected the deal to collapse, especially the defendants in the ever-growing number of lawsuits.

 

Re-cap: On Thursday, May 17, Facebook priced its IPO of 421.2 million shares at $38 each. The IPO opened Friday, May 18, at $42.05 and closed its first day at $38.23. Then it broke issue price on the next trading day, which was Monday, May 21, closing at $34.03.

 

The outcome: That remains to be resolved in the courts.

 

The other whammy was stock market conditions. The Nasdaq Composite Index quietly slipped into a correction. The result brought the IPO calendar to a standstill. Note: The stock market sell-off started before Facebook’s IPO.

 

Re-Cap: The Nasdaq Composite Index closed at 2,778.79 on May 18, DOWN 11 percent from 3,122.57, its previous closing high on March 26. That’s a correction in Wall Street jargon. By June 1, the Nasdaq closed at 2012’s low of 2,747.48.

 

The outcome: That remains to be resolved in Europe.

 

Re-Cap: The IPO calendar generated 18 deals in April, according to the U.S. Securities and Exchange Commission filings, and only one deal after May 11. It was Facebook.

 

The outcome: That remains to be resolved in time.

 

Wall Street folklore says the IPO calendar dries up during market retreats. It usually takes about five to six weeks after a stock market’s bottom for the IPO calendar to come back to life. Let’s go to the numbers.

 

The stock market: On Oct. 3, the Nasdaq Composite closed at 2,335.83, DOWN 18.7 percent from 2,873.54, its previous closing high on April 29.

The IPO calendar: Three deals priced during October and 17 during November.

 

The stock market: On July 2, the Nasdaq Composite closed at 2,091.79, DOWN 17.3 percent from 2,530.15, its previous closing high on April 23.

The IPO calendar: Eleven deals priced during July, seven in September and 66 IPOs during 2010’s 4^th quarter.

 

The stock market: On March 9, the Nasdaq Composite closed at 1,268.64, DOWN 49.9 percent from 2,859.12, its previous closing high on Oct. 31, 2007. That’s right – 2007.

The IPO calendar: There wasn’t one. One deal was priced in March 2009. It took until October 2009 for the calendar to come back, when it generated 14 IPOs. Obviously, the five-to six-week recovery period did not apply due to the longevity and severity of the 2007-2009 sell-off.

 

Let’s jump further back in time to 1998 and a classic five-to six-week recovery period.

 

The stock market: On Oct. 8, the Nasdaq Composite closed at 1,419.12, DOWN 29.5 percent from 2,014.25, its previous closing high on July 20.

The IPO calendar: Five deals priced during October (50 IPOs had been priced in July) and 19 during November. On Nov. 11, EarthWeb’s IPO made it debut. The company priced 2.1 million shares at $14 each and closed its opening day at $48.69, UP 247.8 percent from its initial offering price. The Internet bubble was born.

 

Back to the present and what we might expect, should the Nasdaq Composite hold above its June 1, 2012, closing low. The five- to six-week countdown brings us to mid-July and the traditional post-July 4^th holiday break.

 

The next question is: Which industry will supply the leadership?

 

IPO experts have been looking at the cloud-computing sector. On late Friday afternoon, June 8, Qualys
 (QLYS – proposed) filed for an IPO to raise $100 million.

 

Based in Redwood City, California, Qualys is a provider of cloud security and compliance solutions. The company’s products enable clients to identify security risks to their IT infrastructures, to help protect their IT systems and applications from cyber-attacks, and to achieve compliance with internal policies and external regulations. Qualys was formed in 1999. It has about 313 employees.

 

No pricing date was announced.

 

Stay tuned.