Market Plunge Upsets Firms’ IPO Plans


When a financial storm crushed Beringer Wine Estates Holdings’ plan for a stock offering on Monday, anxious executives found solace in the winery’s best reserve.

“There’s nothing like a fine bottle of Beringer to help ease the pain of the markets,” said Kurt Mobley, an investment banker with Goldman, Sachs & Co., the firm leading Beringer’s first-ever stock deal. “We had a lengthy dinner and drank several bottles.”

Beringer successfully got its deal done the next day, but a record-setting market plunge on Monday temporarily unnerved several California companies like Beringer, scheduled to go public for the first time. By late Tuesday and Wednesday, many companies were finding Wall Street more welcoming, although several deals are still being delayed.

“We have a bit of cherry-picking going on, with only good deals able to come right now,” said David Menlow, president of IPO Financial Network Corp., a data tracker in Springfield, N.J. “Those of questionable support may be quietly pushed back week to week.”


So far this week, no deals have been completely canceled or formally postponed, but some were placed temporarily on hold or delayed a few days or weeks, analysts said.

On Village Communications, a Calabasas-based Internet company, will delay a $9.5-million IPO scheduled for Tuesday until at least next week because of market turmoil, executives said.

“We had so many issues to deal with--the collapse of the market was something we didn’t expect,” said Bill Rossi, chief financial officer at On Village, which is developing an online national yellow pages directory. “It hit us out of the blue.”

Eleven more companies nationwide are scheduled to price IPOs this week, raising a total of $482 million, according to CommScan, a New York data firm. Some 204 companies are on track to go public by the end of the year, raising a total of $9.49 billion, CommScan said.


Last year was a record year for IPOs, but this year activity is expected to be slower. During the first quarter of 1997, few companies went public because of market volatility, but the pace began to heat up again in May and has been strong since then.

Executives at Steri-Oss Inc., a Yorba Linda-based dental company, spent Wednesday on the East Coast talking to investors about their company’s planned $75-million initial public offering, and investment bankers still were not clear whether the deal would get done as planned.

“We haven’t decided yet,” said David L. Dennis, an investment banker with Donaldson Lufkin & Jenrette, the firm taking Steri-Oss public. “Things were difficult on Monday, better by Tuesday and firmer today. We’ll see.”

At Beringer’s headquarters in St. Helena on Wednesday, one employee said it felt like they had “been through the wringer” but were pleased to watch the company’s stock price rise on Wednesday.


On Tuesday night, Beringer successfully priced its IPO, raising about $117 million by selling 4.5 million shares to the public at $26 a share.

Beringer’s shares rose 25% in its first day of Nasdaq trading, increasing $6.50 a share to close at $32.50 a share.

Pricing is key to the success of an IPO, and volatile markets can mean executives might not get the best price for their companies when they sell to the public.

“Bankers are being more vague about exactly what day deals will be priced. That’s because if a market starts going down, it can completely change the pricing, and you don’t want to be fixated on a certain day,” said Henry Taibo, an analyst with CommScan.


Recent market volatility doesn’t seem to have affected IPO filings with the Securities and Exchange Commission, which were still numerous this week, Taibo said. That means many companies are still eager to go public this year, he said.

American Residential Investment Trust, a mortgage real estate investment trust based in Del Mar, was able to go public Wednesday morning at $15 a share, raising $104 million for the company. MMC Networks Inc., a communications company in Sunnyvale, was also able to complete its deal, with high demand on Tuesday night, raising $28 million.

“It is so nerve-racking--we didn’t expect this,” said Paula Jones, an MMC spokeswoman.

One of the biggest and most closely watched California IPOs this year is a $269-million offering for Metro-Goldwyn-Mayer Inc., the Santa Monica-based movie and television studio, known for producing the James Bond movies and films like “The Birdcage” and “Leaving Las Vegas.” The deal is expected to be sold during the second week of November, and the company is going ahead with its roadshow.