Firms Face Tougher Times With Plans for IPOs
The brief resurgence of the market for initial public offerings is winding down and choppy waters lie ahead for companies planning to go public, analysts say.
And the sheer number of deals in the offing has encouraged buyers to be selective.
“The pipeline is pretty jammed,” said David Menlow, president of the IPO Financial Network. He said about 454 equity offerings (including IPOs and secondary) were in registration, within a whisper of the all-time record of 468.
After Wired Ventures pulled the plug on its high-profile IPO last week, investors are likely to be even more skittish, analysts said.
Wired blamed poor market conditions, “particularly as they pertain to Internet-related companies.”
“A lot of it has to do with the bear market we had for two days in July, which set the stage for the supply problem we have now,” Menlow said.
Many offerings were postponed in July as the broader market fell.
However, several firms--including Stage Stores Inc., Digex Inc. and UroQuest Medical Corp--had solid market debuts in the last two weeks despite summer postponements.
Other companies, including Earthlink Network, Koppers Inc. and Twinlab, are also resurrecting their offerings, but the slim window of opportunity may have passed.
IPOs performed well in the last few weeks, analysts say, because they were given lower valuations during the downturn. Smelling bargains, institutional investors went on a shopping spree.
But deals coming to market don’t have such reasonable price tags, causing large funds to turn up their noses.
“It’s turned from a seller’s market to a buyer’s market,” Menlow said.
“A lot of my clients, who had never gotten allocations, were suddenly getting them for Amerisafe. That’s trouble,” said Manish Shah of the IPO Maven.
By “trouble,” Shah was referring to the commonly held belief that small investors are generally shut out of the high-profile IPO market, and can only participate if institutions shun the deal.
Amerisafe postponed its offering Friday, citing poor market conditions.
“A few things have done well lately but everything has become very questionable,” Shah said.
Still, the looming uncertainty will not necessarily tarnish good companies. Ingram Micro’s $300-million IPO is expected to be a standout this week.
The Santa Ana wholesale distributor of microcomputer products had 1995 sales of $8.6 billion.
Other deals that could prosper this week include Advanced Radio Telecom Inc., Aurum Software Inc., CII Technologies Inc., Depuy Inc., Integrated Medical Resources Inc., National-Oilwell Inc., O’Gara Inc., Triangle Pharmaceutical Inc., Voxware Inc., Delta Financial and Donnelley Enterprises Solutions Inc., according to Vince Slavin, who tracks IPOs for Cantor Fitzgerald.
Thirty more companies plan IPOs this week.
