The IPO Buzz: Hot Signals for the New Year

Since the middle of December, two dozen companies have filed to go public.

 

Starting in mid-August 2013, when the IPO calendar traditionally closes down, the SEC filings picked up steam. During the last three weeks of August, 22 IPOs were filed, or an average of 7.3 filings per week. That was significantly higher than 4.4 filings per week from January through mid-August.

 

And the IPO calendar responded.

 

September through December (a four-month period): 91 IPOs were priced with eye-popping aftermarket results. Their opening-day scorecard: 66 winners, 19 losers and six unchanged. The average opening-day gain for all 91 IPOs was 24.1 percent.

 

January through August (an eight-month period): 127 IPOs were priced with respectable aftermarket results. Their opening-day scorecard: 83 winners, 36 losers and eight unchanged. The average opening-day gain for all 127 IPOs was 15.1 percent.

 

(Note: The above numbers exclude unit offerings consisting of common stock and warrants, closed-end investment companies, bank conversions and American Depositary Shares being offered for the first time in the U.S. capital markets that represent shares already traded on their own stock exchange.)

 

Here’s what has been happening at the SEC filing window since mid-December, another traditional time when the IPO calendar closes down: 24 IPOs were filed.   

 

The heaviest filings came from the health-care sector – 11 from the biopharmaceutical industry. It is worth noting: The last three bio-IPOs that were priced closed on Friday, Jan. 3, 2014, UP an average 56.8 percent from their initial offering prices. But don’t get carried away.

 

Now for the downside: Two of those three IPOs were reduced in size to meet limited investor demand and got a “dead cat bounce.” And another two bio-IPOs that appeared on the calendar were postponed due to market conditions.

 

There has been a lot of talk in the financial press about social media companies going public. At last count, about 30 companies have been identified as potential IPOs in 2014 – and this year’s IPO hunting season hasn’t even started.

 

One example is Snapchat, a provider of photo messaging applications enabling users to send photos, videos, text and drawings that vanish within seconds. On Nov. 14, 2013, The Wall Street Journal reported Snapchat rejected a $3 billion cash offer from Facebook (FB).

 

Chinese IPOs are back in play. Eight Chinese IPOs were priced in the U.S. capital markets during 2013. Their scorecard on Dec. 31, 2013: Seven winners, one loser and the average aftermarket gain for all eight was 90.7 percent. That type of honey draws a lot of interest. To date, no filings have appeared at the SEC filing window, but there’s talk – lots of talk.

 

Probably the loudest buzz in today’s IPO market is the pending Alibaba offering. Alibaba is China’s leading e-commerce company. The talk is that the company could raise multibillions of dollars in the IPO market. One question floating around is: Which market? Some say China. Some say the United States. Others think London could be the place.

 

And informed sources report that the New York Stock Exchange has 10 Chinese companies approved for trading on the Big Board sometime during 2014, yet there are no SEC filings.

 

In conclusion: As we have seen many times in today’s IPO market, the JOBS Act of 2012 has simplified and accelerated the IPO process. In a nutshell, a company submits a confidential filing to the SEC without public disclosure. Once the paperwork is completed, market testing is done, other pieces fall into place, and stock market conditions are favorable, then the S-1 filing is posted on the SEC’s website. Once that happens, a company’s IPO can be on the calendar in a few weeks. In some cases, it has all come together in just a few days.

 

Monday, Jan. 6, starts the watch of the SEC’s filing window and the wait for the 2014 IPO calendar to shape up.  

 

Stay tuned.