It Was a Manic-Depressive 12 Months for the IPO Market
It was a 12-month roller-coaster ride for initial public offerings in 1998, a ride that included some of the largest deals in history but fewer deals than in the previous two years.
Marked by massive swings in IPO activity, 1998 turned some companies into household names as their offerings shot to record highs in just hours of trading.
“It’s kind of unusual to see such dramatic swings within one year--the term that comes to mind is manic-depressive,” said Jay Ritter, an IPO specialist and professor of finance at the University of Florida in Gainesville.
Although the first few months of 1998 were steady and quiet, the market began to warm up in the spring with such big names as Broadcom Corp., the Irvine semiconductor maker that rose 123% on its first trading day in April, and continued to heat up through early July. Two tech companies had big openings in June: Marina del Rey-based GeoCities and San Mateo-based Inktomi Corp., up 119% and 100%, respectively, on their first trading days.
In the fall, an early freeze shut down the IPO market, and for three consecutive weeks no initial offerings were made, a rare drought.
But in late September, a little San Jose company called EBay Inc. hit the market with one of the best-performing IPOs of all time, not just in its first day but over a sustained period, signaling an IPO market comeback. Then came blockbuster deals in December by San Francisco-based Xoom.com Inc., up 146% on its first day, and Pasadena-based Ticketmaster Online-Citysearch Inc., up 187.5%.
“When the stock market took a breather in the fall, so did IPOs,” said Gail Bronson, an analyst with IPO Monitor, a Calabasas data firm. “In the past few weeks, we’ve been riding the crest of a good economic backdrop, low interest rates and relative prosperity, and companies are taking advantage of this.”
The year ended with a total of $37.7 billion raised in 363 IPOs, according to CommScan, a New York-based investment banking research firm, making it slower than last year, when $39 billion was raised in 547 IPO deals. In 1996, $46 billion was raised in 760 IPOs.
Although many of the biggest names this year were California companies, the list wasn’t completely dominated by the northern part of the state, a hopeful sign to some specialists eagerly watching the local economy. When a company raises money through a first-time stock offering, the proceeds are often used to pay for expansion and hire more people.
“It’s great news for California,” said Alfred E. Osborne, head of entrepreneurial studies at UCLA’s Anderson School of Management. “It shows a resilience of our intellectual capital to go where the opportunities are. And many of these IPOs were from Southern California companies. We’ve reinvented ourselves.”
This year had not only several of the better-performing IPOs after just one day, but also some of the largest offerings ever.
The largest deal this decade was by oil producer Conoco Inc., which raised $4.4 billion in October. This month, CBS Corp.’s Infinity Broadcasting Corp., one of the biggest U.S. radio and billboard companies, raised $2.87 billion in the third-largest IPO by a U.S. issuer this decade. And Fox Entertainment Group Inc. raised $2.81 billion in November, the fourth-largest IPO of the decade.
But while many deals posted spectacular first-day price gains of 100%, 200% or more, the aggregate performance for the year is less glowing.
While Internet IPOs rose an average of 120% this year as of Tuesday’s close, non-technology IPOs fell an average of 7%, according to Securities Data Co. Excluding Internet companies, IPOs rose 1% on average. Including the spectacular performance of Internet IPOs, the average gain was 15%.
But the aggregate performance of all IPOs trailed the 27% rise in the Standard & Poor’s 500 index this year, through Tuesday. Bloomberg News’ IPO index, which tracks companies during their first publicly traded year, is up about 10% for the year.
For every EBay--up about fifteen-fold so far--there are many that flame out as quickly as they appeared.
As the University of Florida’s Ritter put it, “A lot of these are going to be dogs in the long run.”
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Offerings in the ‘90s
The number of initial public offerings and the amount of money raised are down in 1998:
Money Raised
United States: $37.7 billion
California: $3.4 billion
*
Number of IPOs United States: 363
California: 66
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* Through Dec. 22
Source: CommScan
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1998: The Year in IPOs
10 Best-Performing California Offerings This Year
Tech companies dominate the list of the state’s strongest initial public offerings this year, and none has matched the performance of Internet auction site EBay.
Issuer: EBay
Total amount raised, in millions: $63.0
Lead manager: Goldman Sachs
Pricing date: 9/23
Ticker symbol: EBAY
Issuer headquarters: San Jose
Offer price: $18
First day % change: +163.19%
Dec. 22 price: $301.00
% change, offer to Dec. 22: +1,572%
*
Issuer: Inktomi
Total amount raised, in millions: 40.6
Lead manager: Goldman Sachs
Pricing date: 6/9
Ticker symbol: INKT
Issuer headquarters: San Mateo
Offer price: 18
First day % change: +100.00
Dec. 22 price: 135.13
% change, offer to Dec. 22: +651
*
Issuer: Broadcom
Total amount raised, in millions: 84.0
Lead manager: Morgan Stanley Dean Witter
Pricing date: 4/16
Ticker symbol: BRCM
Issuer headquarters: Irvine
Offer price: 24
First day % change: +123.44
Dec. 22 price: 116.38
% change, offer to Dec. 22: +385
*
Issuer: Verisign
Total amount raised, in millions: 42.0
Lead manager: Morgan Stanley Dean Witter
Pricing date: 1/29
Ticker symbol: VRSN
Issuer headquarters: Mountain View
Offer price: 14
First day % change: +82.14
Dec. 22 price: 59.31
% change, offer to Dec. 22: +324
*
Issuer: Exodus Comm.
Total amount raised, in millions: 67.5
Lead manager: Goldman Sachs
Pricing date: 3/18
Ticker symbol: EXDS
Issuer headquarters: Santa Clara
Offer price: 15
First day % change: +84.17
Dec. 22 price: 62.94
% change, offer to Dec. 22: +320
*
Issuer: Ticketmaster Online
Total amount raised, in millions: 98.0
Lead manager: NationsBanc Montgomery
Pricing date: 12/2
Ticker symbol: TMCS
Issuer headquarters: Pasadena
Offer price: 14
First day % change: +187.50
Dec. 22 price: 48.50
% change, offer to Dec. 22: +246
*
Issuer: Bebe Stores
Total amount raised, in millions: 27.5
Lead manager: BancBoston Robertson Stephen
Pricing date: 6/16
Ticker symbol: BEBE
Issuer headquarters: Brisbane
Offer price: 11
First day % change: +19.89
Dec. 22 price: 31.75
% change, offer to Dec. 22: +189
*
Issuer: Beyond.com
Total amount raised, in millions: 45.0
Lead manager: Deutsche Bank Securities
Pricing date: 6/16
Ticker symbol: BYND
Issuer headquarters: Sunnyvale
Offer price: 9
First day % change: +47.22
Dec. 22 price: 25.19
% change, offer to Dec. 22: +180
*
Issuer: Terayon Comm. Sys.
Total amount raised, in millions: 39.0
Lead manager: BT Alex. Brown
Pricing date: 8/17
Ticker symbol: TERN
Issuer headquarters: Santa Clara
Offer price: 13
First day % change: +11.06
Dec. 22 price: 35.88
% change, offer to Dec. 22: +176
*
Issuer: Xoom.com
Total amount raised, in millions: 56.0
Lead manager: Bear Stearns
Pricing date: 12/8
Ticker symbol: XMCM
Issuer headquarters: San Francisco
Offer price: 14
First day % change: +145.99
Dec. 22 price: 34.88
% change, offer to Dec. 22: +149
10 Largest California Offerings This Year
Issuer: Maxtor
Total amount raised, in millions: $332.5
Lead manager: Salomon Smith Barney
Pricing date: 7/30
Ticker symbol: MXTR
Issuer headquarters: Milpitas
Offer price: $7.00
Dec. 22 price: $13.50
% change, offer to Dec. 22: +92.9%
*
Issuer: Aurora Foods
Total amount raised, in millions: 304.5
Lead manager: Goldman Sachs
Pricing date: 6/25
Ticker symbol: AOR
Issuer headquarters: San Francisco
Offer price: 21.00
Dec. 22 price: 17.75
% change, offer to Dec. 22: --15.5
*
Issuer: EarthShell
Total amount raised, in millions: 277.2
Lead manager: Salomon, CS First Boston
Pricing date: 3/23
Ticker symbol: ERTH
Issuer headquarters: Santa Barbara
Offer price: 21.00
Dec. 22 price: 12.94
% change, offer to Dec. 22: --38.4
*
Issuer: PBOC Holdings
Total amount raised, in millions: 174.2
Lead manager: Sandler, O’Neill & Partners
Pricing date: 5/12
Ticker symbol: PBOC
Issuer headquarters: Los Angeles
Offer price: 13.75
Dec. 22 price: 10.00
% change, offer to Dec. 22: --27.3
*
Issuer: Ticketmaster Online-CitySearch
Total amount raised, in millions: 98.0
Lead manager: NationsBanc Montgomery
Pricing date: 12/2
Ticker symbol: TMCS
Issuer headquarters: Pasadena
Offer price: 14.00
Dec. 22 price: 45.56
% change, offer to Dec. 22: +225.5
*
Issuer: Headlands Mortgage
Total amount raised, in millions: 96.0
Lead manager: NationsBanc Montgomery
Pricing date: 2/4
Ticker symbol: HDLD
Issuer headquarters: Larkspur
Offer price: 12.00
Dec. 22 price: 20.06
% change, offer to Dec. 22: +67.2
*
Issuer: Broadcom
Total amount raised, in millions: 84.0
Lead manager: Morgan Stanley Dean Witter
Pricing date: 4/16
Ticker symbol: BRCM
Issuer headquarters: Irvine
Offer price: 24.00
Dec. 22 price: 119.88
% change, offer to Dec. 22: +399.5
*
Issuer: GeoCities
Total amount raised, in millions: 80.8
Lead manager: Goldman Sachs
Pricing date: 8/10
Ticker symbol: GCTY
Issuer headquarters: Santa Monica
Offer price: 17.00
Dec. 22 price: 39.94
% change, offer to Dec. 22: +134.9
*
Issuer: Aspec Technology
Total amount raised, in millions: 78.0
Lead manager: Hambrecht & Quist
Pricing date: 4/27
Ticker symbol: ASPCE
Issuer headquarters: Sunnyvale
Offer price: 13.00
Dec. 22 price: 1.56
% change, offer to Dec. 22: --88.0
*
Issuer: MIPS Technologies
Total amount raised, in millions: 77.0
Lead manager: Deutsche Bank Securities
Pricing date: 6/29
Ticker symbol: MIPS
Issuer headquarters: Mountain View
Offer price: 14.00
Dec. 22 price: 28.00
% change, offer to Dec. 22: +100.0
The Fall Freeze
1998 was a strong year for IPOs, despite weeks without any deals during the early fall. U.S. offerings and money raised, by month:
(Please see newspaper for full chart information)
Number of U.S. IPOs
December: 22
Money Raised
December: $3.8 billion (through Dec. 22)
*
Source: CommScan
The Top U.S. Underwriters
The leading underwriters and their IPO volume:
*--*
IPO volume, Deals as Rank Manager in billions lead manager 1 Merrill Lynch $9.2 17 2 Morgan Stanley Dean Witter 8.9 23 3 Goldman Sachs 3.3 23 4 Salomon Smith Barney 2.5 19 5 Credit Suisse First Boston 1.7 13 6 Prudential Securities 1.4 12 7 Donaldson, Lufkin & Jenrette 1.2 14 8 Friedman, Billings, Ramsey & Co. 1.0 6 9 BT Alex. Brown 0.9 16 10 Bear Stearns 0.9 14 11 Lehman Bros. 0.8 6 12 BancBoston Robertson Stephens 0.7 16 13 NationsBanc Montgomery 0.7 13 14 Hambrecht & Quist 0.4 9 15 Deutsche Bank Securities 0.3 7
*--*
*
Bloomberg News was used in compiling this report.
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Times staff writer Debora Vrana covers investment banking and the securities industry. She can be reached by e-mail at debora.vrana@latimes.com.
