The IPO Buzz: Hide the Report Card

 

It’s not a pretty picture.

 

By the end of August, bankers will have priced 47 IPOs this year to raise $27.7 billion, according to U.S. Securities and Exchange Commission filings. That is well below 2007’s pace. By Aug. 31, 2007, bankers had priced 176 IPOs for the year to date and had raised $37.8 billion.

 

A sobering thought: This year’s IPO traffic will be the slowest January-through-August period since 2003, when bankers priced 25 IPOs that raised $4.96 billion.

 

(Note: These figures exclude closed-end funds, investment companies, bank conversions, “best effort” deals and foreign companies issuing American Depositary Shares or Receipts when the underlying shares are traded on their own stock exchanges.)

 

The reason for the meltdown of 2008 can be summarized in two words: “market conditions.”

 

By the end of the third week in August, the Dow Jones Industrial Average was down 12.34 percent for the year. The Nasdaq Composite Index was down 8.96 percent and the S&P 500 was down 12 percent for the year. The causes have been well reported, such as the subprime market’s continued collapse, major write-downs by Wall Street’s big investment banks, oil prices soaring to a record near $150 per barrel, the recession, etc. Any one of these could do the trick, but all piling in at about the same time proved to be too much for the bulls.

 

This year’s stock market opened with sharp losses. The Dow Jones Industrial Average took a 220-point loss, closing at 13,043.96 on Jan. 2, down from its year-end close at 13,264.82 on Dec. 31. The Nasdaq and the S&P 500 followed suit.

 

But each month had a story to tell.

 

The year’s IPO market got off to a good start. Bankers priced 12 deals in January that raised $2.5 billion. Seven of those were “blank check” offerings.

 

(Note: In calculating aftermarket performance, IPOScoop.com does not include “blank check” deals or other types of unit offerings. Sometimes after pricing, the units will separate and the common stock and warrants will then trade by themselves. Also, the quote services are not set up to factor both securities into the equation to give accurate aftermarket performance results.)

 

On Friday, Aug. 22, three of January’s five IPOs closed above their initial offering prices. Their average gain was 17.4 percent. In contrast, the Nasdaq was down 8.96 percent for the year so far.

 

IPC The Hospitalist Company (GMS: IPCM) (Quote, chart & news), a North Hollywood, California-based provider of hospital services, priced its IPO of 5.2 million shares at $16 each on Jan. 25. On Aug. 22, IPC closed at $24.35, UP 52.2 percent from its initial offering price.

 

Williams Pipeline Partners L.P. (NYSE: WMZ) (Quote, chart & news), a Tulsa-based limited partnership operating natural gas transportation and storage assets, priced its IPO of 16.3 million shares at $20 each on Jan. 17. On Aug. 22, Williams closed at $16.77, DOWN 16.2 percent from its offering price.

 

Bankers priced eight deals in February that raised $943 million. Four of those were “blank check” offerings.

 

On Friday, Aug. 22, two of February’s four IPOs closed above their initial offering prices. The other two didn’t fare so well. For the four deals, their average loss was 7.5 percent. In contrast, the Nasdaq was up 1 percent from its close on Jan. 31.

 

ArcSight (GMS: ARST) (Quote, chart & news), a Cupertino, California-based provider of security and compliance management solutions, priced its IPO of 6.9 million shares at $9 each on Feb. 14. On Aug. 22, ArcSight closed at $10, UP 11.1 percent from its initial offering price.

 

MAKO Surgical (GMS: MAKO) (Quote, chart & news), a Fort Lauderdale, Florida-based medical device company, priced its IPO of 5.1 million shares at $10 each on Feb. 14. On Aug. 22, MAKO closed at $7.13, DOWN 28.7 percent from its offering price.

 

Bankers priced four deals in March that raised $18 billion. One of those was a unit offering.

 

By the closing bell on Aug. 22, the other three March IPOs ended above their initial offering prices. Their average gain was 61.9 percent -– yes, that’s right UP 61.9 percent. And the Nasdaq was up 6.3 percent from Feb. 29.

 

CardioNet (GMS: BEAT) (Quote, chart & news), a San Diego-based provider of ambulatory, continuous, real-time outpatient management solutions, priced its IPO of 4.5 million shares at $18 each on March 18. On Aug. 22, CardioNet closed at $31.18, UP 73.2 percent from its initial offering price.

 

Visa (NYSE: V) (Quote, chart & news), a provider of electronic payment solutions, priced its IPO of 409 million shares at $44 each on March 18. On Aug. 22, Visa closed at $74.09, UP 68.4 percent from its offering price.

 

There were no goats from March’s IPO calendar.

 

Bankers priced five deals in April that raised $2.8 billion. There were no “blank check” offerings.

 

On Aug. 22, two of April’s five IPOs closed above their initial offering prices. Their average gain was 11.8 percent. In comparison, the Nasdaq was up 5.98 percent from March 30.

 

Intrepid Potash (NYSE: IPI) (Quote, chart & news), a Denver-based producer of muriate of potash, priced its IPO of 30 million shares at $32 each on April 22. On August 22, Intrepid closed at $46.37, UP 44.9 percent from its initial offering price.

 

Hatteras Financial (NYSE: HTS) (Quote, chart & news), a Winston Salem, North Carolina-based externally-managed mortgage REIT, priced its IPO of 10 million shares at $24 each on April 24. On Aug. 22, Hatteras closed at $23.42, DOWN 2.4 percent from its offering price.

 

Bankers priced seven deals in May that raised $1.3 billion. One of those was a “blank check” offering.

 

By the close on Aug. 22, only one of May’s six IPOs ended above its initial offering price. Their average loss was 7.8 percent. The Nasdaq was up 0.1 percent from April 30.

 

Colfax (NYSE: CFX) (Quote, chart & news), a Richmond, Virginia-based supplier of fluid handling products, including pumps, fluid handling systems and specialty valves, priced its IPO of 18.8 million shares at $18 each on May 7. On Aug. 22, Colfax closed at $24.54, UP 36.3 percent from its initial offering price.

 

Verso Paper (NYSE: VRS) (Quote, chart & news), a Memphis-based supplier of coated papers, priced its IPO of 14 million shares at $12 each on May 14. On Aug. 22, Verso Paper closed at $4.75, DOWN 60.4 percent from its offering price.

 

Bankers priced four deals in June that raised $535 million. One was a “blank check” offering. Of the remaining three deals, one stumbled badly and had slid almost 40 percent from its initial offering price by the closing bell on Aug. 22. Although the other two had gains for the period, the clunker took its toll and pulled the whole group down. Their average loss was 12.6 percent. In comparison, the Nasdaq was down 4.3 percent from May 30.

 

Hong Kong Highpower Technology (AMEX: HPJ) (Quote, chart & news), a China-based manufacturer of rechargeable batteries, priced its IPO of 603.000 shares at $3.25 each on June 19. On Aug. 22, Hong Kong Highpower closed at $4.40, UP 35.4 percent from its initial offering price.

 

Britannia Bulk Holdings (NYSE: DWT) (Quote, chart & news), a London-based provider of drybulk shipping, priced its IPO of 8.3 million shares at $15 each on June 18. On Aug. 22, Britannia Bulk closed at $9.13, DOWN 39.1 percent from its offering price.

 

Bankers priced four deals in July that raised $730 million. One of those was a “blank check” offering.

 

By the closing bell on Aug. 22, only one of July’s three IPOs closed above its initial offering price. The other two were less than stellar. For the three deals, their average loss was 13.6 percent. The Nasdaq was up 5.3 percent from June 30.

 

Energy Recovery (GMS: ERII) (Quote, chart & news), a San Leandro, California-based manufacturer of energy recovery devices used in water desalination, priced its IPO of 14 million shares at $8.50 each on July 2. On Aug. 22, Energy Recovery closed at $9.25, UP 8.8 percent from its initial offering price.

 

China Distance Education Holdings (NYSE: DL) (Quote, chart & news), a China-base educational services provider, priced its IPO of 8.8 million shares at $7 each on July 29. On Aug. 22, China Distance closed at $4.55, DOWN 35 percent from its offering price.

 

Bankers priced three deals in August that raised $265 million. One of those was a “blank check” offering. The other two August IPOs closed below their initial offering prices on Friday, Aug. 22. Their average loss was 15.4 percent. In contrast, the Nasdaq was up 3.8 percent from July 31.

 

There were no heroes from the August IPO calendar.

China Mass Media International Advertising (NYSE: CMM) (Quote, chart & news), a China-base educational services provider, priced its IPO of 8.8 million shares at $7 each on July 29. On Aug. 22, China Distance closed at $4.55, DOWN 35 percent from its offering price.

 

In closing, don’t believe what you have been reading about “blank check” offerings vanishing from the IPO market. This simply isn’t true.

 

The Securities and Exchange Commission’s records showed that 15 “blank check” deals have been priced so far this year. That amounted to 31.9 percent of 2008’s IPO traffic.

 

Note: The IPO Buzz will not be published next week, Sept. 1, which is Labor Day. It will resume publishing the following Monday, on Sept. 8.