Then the stock market swirled through the week like a tornado and by Friday’s close, all the popular stock market indexes had lost anywhere from nearly 5 percent to almost 8 percent. On Friday, four IPOs were withdrawn. (These were not the four deals cited in the opening paragraph.)
But it wasn’t the end of the world.
A Biblical Dry Spell
Before last Monday, November 10, the previous IPO filing was on Sept. 29, according to the U.S. Securities and Exchange Commission filings. It was Edgen Murray (NYSE: EMY proposed), a Bermuda-based specialty steel distributor.
That was a 42-day dry run.
It is not too hard to believe that was the longest dry-spell run in the 2000 decade. (And its length is close to the 40 days and 40 nights of rain in the Old Testament.)
The previous IPO filing dry spell started on March 5, 2003, when Axis Capital Holdings (NYSE: AXS), a Bermuda-based real estate reinsurance company, filed to raise $294.8 million. The next filing came on April 10 when NETGEAR (GMS: NTGR), a Santa Clara, California-based designer of networking products, filed an IPO to raise $98 million.
That was a 36-day dry run.
(Excluded were best effort offerings, unit offerings, closed-end funds, investment trusts, bank conversions, real estate investment trusts and foreign companies offering American Depositary Shares when their securities were trading on their national stock exchanges.)
Get Smart
Bankers plan to price Grand Canyon Education (GMS: LOPE proposed), a Phoenix-based provider of online postsecondary education services, on Wednesday, Nov. 19. If all goes according to plans, the deal will get priced and it will end a dry run of 104 days between IPOs.
On Aug. 7, Rackspace Hosting (NYSE: RAX), a San Antonio-based Web hosting provider, priced its IPO of 15 million shares at $12 each. The stock started trading at $10 per share and had never seen its initial offering price. Passing point of interest: The deal came to market through the Dutch auction bidding system.
The longest IPO dry run since January 1970 began on June 17, 1974, with the Terra Chemicals International IPO and ended with the Royster IPO pricing on Jan. 30, 1975, according to figures supplied by Dr. Jay R. Ritter, Cordell Professor of Finance at the University of Florida.
That was a 227-day dry run.
Now let’s take a look at the Grand Canyon deal.
The company plans to price 10.5 million shares at $16 to $18 each to raise $178.5 million. However, its price range has been reduced from $18 to $20 per share. Normally to cut a deal is not a sign of investor demand. But let’s back up and take a closer look at the company and the last two educational providers to have gone public.
Grand Canyon (Google finance) was formed in 1949 and has nearly 1,200 employees. The company has posted favorable numbers. Consider the following:
- For the year ending December 31, 2007, Grand Canyon reported net income of $1.1 million on net revenues of $99.3 million, compared with net income of $71,000 on net revenues of $72.1 million for the same period a year ago.
- For the nine months ending Sept. 30, Grand Canyon reported net income of $3.7 million on net revenues of $109.6 million, compared with net income of $68,500 on net revenues of $68.5 million for the same period a year ago.
For perspective, it’s worth noting that the IPOs of the last two American educational providers to have recently gone public have done well. They were American Public Educational (GMS: APEI) (Chart, news and industry) and K12 (NYSE: LRN) (Chart, news and industry).
American Public Education, a Charles Town, West Virginia-based provider of online postsecondary education, priced 4.7 million shares at $20 each on Nov. 9, 2007. The stock closed on Friday, Nov. 14, at $38.77 — UP 93.9 percent from its initial public offering.
- For the year ending December 31, 2007, American Public reported net income from continuing operations of $8.8 million on revenues of $69.1 million, compared with net income from continuing operations of $2.5 million on revenues of $40 million for the same period a year ago.
- For the nine months ending Sept. 30, American Public reported net income from continuing operations of $11.1 million on revenues of $75.6 million, compared with net income from continuing operations of $5.8 million on revenues of $47.9 million for the same period a year ago.
K12, a Herndon, Virginia-based provider of curriculum and educational services created for online delivery to students in kindergarten through 12th grade, priced 6 million shares at $18 each on Dec. 12, 2007. The stock closed on Friday, Nov. 14, at $20.85 — UP 15.8 percent from its initial public offering.
- For the year ending June 30, 2008, K12 Canyon reported net income of $33.8 million on revenues of $226.2 million, compared with net income of $3.9 million on revenues of $140.6 million for the same period a year ago.
- For the three months ending Sept. 30, K12 reported net income of $5.9 million on revenues of $88.6 million, compared with net income of $12.8 million on revenues of $59.4 million for the same period a year ago.
The Dow’s Latest Dive
The stock market racked up some serious losses last week with Dow Jones Industrial Average bowing out on Friday with a 337.94-point loss.
This didn’t seem to affect the television stock market gurus. Their consensus was that the market had hit a triple bottom.
About the only accurate call one can make in this wild, rollicking market is if you don’t like what you see – come back in about an hour.