The IPO Buzz: Hide That Report Card

As of the close of business on Tuesday, August 31, bankers had priced 86 IPOs for the year to date, according to the U.S. Securities and Exchange Commission’s filings. This figure omits six unit offerings consisting of common stock and warrants.

 

Let’s call for a muffled drum roll, please: 29 closed above their initial offering prices, 56 below and one was unchanged. The average loss for the 86 was 4.04 percent.

 

Actually, that wasn’t such a bad performance when compared with the underlying stock market. On Aug. 31st, the Dow Jones Industrial Average was down 3.96 percent for the year and down 10.6 percent from its April closing high; the Nasdaq Composite Index was down 6.84 per cent for the year and down 16.5 percent from its April closing high, while the S&P 500 was down 5.9 percent for the year and down 13.4 percent from its April closing high.

 

Here’s where it starts to get dicey.

 

Given that the first name on the left-hand side of an IPO’s prospectus is usually considered the most important, here’s how the individual report cards read.

 

Note: The oligopoly among investment bankers continued to make its presence felt. Sixteen bankers offered IPOs, but the five busiest priced 59 of the year’s 86 deals. That amounted to 68.4 percent of the year’s traffic.

 

The No. 1 ranking goes to Morgan Stanley, both in terms of traffic and in aftermarket performance, according to SEC filings.

 

The Morgan Stanley name appeared first 15 times on the cover page of IPO prospectuses. On Aug. 31, eight of the IPOs closed above their offering prices, six below and one was unchanged. The 15 had an average gain of 13.3 percent.

 

The Goldman Sachs name appeared first 15 times on the cover page of prospectuses. On Aug. 31, three IPOs closed above their offering prices, 12 were below and the average loss for the 15 was 17.1 percent.

 

The J.P. Morgan name appeared first 12 times on the cover page of prospectuses. On Aug. 31, four IPOs closed above their offering prices, eight were below and the average loss for the 12 was 1.96 percent.

 

The Credit Suisse name appeared name first 10 times on the cover page of prospectuses. On Aug. 31, three IPOs closed above their offering prices, seven were below and the average loss for the 10 was 2.99 percent.

 

The BofA Merrill Lynch name appeared first seven times on the cover page of prospectuses. On Aug. 31, one closed above its offering price, six were below and the average loss for the seven was 13.6 percent

 

However, a few IPOs did remarkably well in the aftermarket. But none were from the U.S.A. Their report cards follow.

 

JinkoSolar Holding (JKS), a Chinese solar products manufacturer, priced its IPO of 5.8 million shares at $11 each on May 13. Its shares closed on Tuesday, Aug. 31, at $27.38 per share — UP 148.91 percent from its initial offering price. Credit Suisse was the sole lead manager.

 

MakeMyTrip (MMYT), an Indian online travel agency, priced its IPO of 5 million shares at $14 each on Aug. 11. Its shares closed on Aug. 31 at $32.90 per share — UP 135 percent from its initial offering price. Morgan Stanley was the sole lead manager.

 

HiSoft Technology International (HSFT), a Chinese provider of outsourced IT and research and development services, priced its IPO of 7.4 million shares at $10 each on June 29. Its shares closed on Aug. 31 at $20.32 per share — UP 103.2 percent from its initial offering price. Deutsche Bank Securities was the sole lead manager.

 

Mitel Networks (MITL), a Canadian provider of integrated communications solutions, priced its IPO of 10.5 million shares at $14 each on April 21. Its shares closed on Aug. 31 at $6.42 per share — DOWN 54.1 percent from its initial offering price. BofA Merrill Lynch, J.P. Morgan and UBS Investment Bank were the joint-lead managers.

 

What you’ve read so far is the bad news.

 

But there is some good news.

 

Wall Street’s climate has improved in the past few weeks, as if a late summer trade wind had blown through the concrete canyons where the bulls like to run.

 

The three major U.S. stock indexes have recovered from their July lows. On Friday, Sept. 3, the Dow Jones Industrial Average was UP 7.86 percent from its July closing low, the Nasdaq Composite was UP 2.96 percent from its July closing low, and the S&P 500 was up 8.01 percent from its closing low for the month of July.

 

More good news: The IPO filings continue to build. This year’s total filing traffic stood at 189 IPOs as of Friday, Sept. 3, 2010 — UP from 48 for the same period a year ago.

 

And for the first time in memory, two IPOs have wiggled their way onto the IPO calendar BEFORE Labor Day.

 

You usually see the traffic start building AFTER Labor Day.