California companies raised a record $4.6 billion through initial public stock offerings in the year's first half, according to Thomson Financial Securities Data. Nearly $3.3 billion came in the second quarter, and analysts say the steaming market for IPOs shows no sign of cooling.
An annotated glance at the trends:
* The Geography Gap:
The Civil War. A Carolina college basketball game. And California's capital-raising battle.
These are all things the South is unlikely to win.
"Silicon Valley is clearly still the center of the Earth for new offerings," said John B. Jackson, senior vice president with Bowne of Los Angeles, a financial printing firm that works on investment deals.
It shows in performance: Nine of the 10 best-performing IPOs in the first half came from Northern California companies, while six of the bottom 10 came from Southern California.
The Southland, however, hatched sizzlers such as San Diego high-speed telecom specialist Copper Mountain Networks, up 268% from its offer price through Wednesday; Santa Monica online retailer EToys, up 104%; and Pasadena Internet search engine GoTo.com, up 87%.
And in its second-quarter report, Bowne noted that while Northern California IPO dollar volume rose 138% over the same period in 1998, Southern California was hardly disgraced, its volume jumping 120%--even if individual stock performance was less spectacular.
* Underperformers and Overachievers:
Germans may be known for their moody films and nifty cars, but not for their California IPO underwriting--at least not yet. Three of the 10 worst-performing stocks in the half were lead-managed by BT Alex. Brown, the brokerage recently bought by Germany's Deutsche Bank and now dubbed Deutsche Banc Alex. Brown. Not all its offerings were laggards, though, as San Francisco-based investing Web site MarketWatch.com soared 246%.
San Francisco underwriter W.R. Hambrecht & Co. sent two companies public via its newfangled, supposedly egalitarian "Dutch auction" format, and the market yawned. Ravenswood Winery and Salon.com were in the bottom 20 IPO stocks. The underwriter stresses, however, that its auction format is designed to keep a cap on IPO euphoria, giving the companies a bigger-than-usual slice of the action.
Among underwriters that lead-managed three or more California IPOs, Morgan Stanley Dean Witter performed best, its deals gaining 292% from the offer price, on average, followed by Goldman Sachs at 150% and Donaldson, Lufkin & Jenrette at 93%.
* The Dot-Com Difference:
Though the offering market's volume was evenly split, with $2.3 billion in deals coming from Internet-related firms and another $2.3 billion from non-Net firms, the Net stocks outperformed the others.
Paced by ninefold gainer Healtheon Corp. of Santa Clara, the Net stocks rose 130% from their offer price, on average, versus 71% for the non-Net stocks.
But the privileged investors who got the Net deals at their offering prices took home most of those gains: The 31 Internet IPOs surged an average of 127% their first day, so in many cases investors shut out of top offerings missed most of the pop. Among the non-Net IPOs, that gap was smaller, as they gained 44%, on average, their first day.
Of course, a "dot com" in the name was no guarantee of success, first day or otherwise. San Diego real estate information site Comps.com plunged 51% from its May 5 offer price through June 30.
* Power in the Pipeline:
Bowne's Jackson expects the strong IPO run that started in February to continue. The state's brimming pipeline could produce 100 offerings in the second half. "All the law firms and underwriters are working at full capacity," he said.
Some companies are rushing to go public before possible Y2K computer bug-related market jitters later this year. But in general, the strong economy and healthy investor hunger for equities are what's firing the IPO market.
Indeed, though some companies, such as JFax.com and DVD Express, both of Los Angeles, have postponed their offerings, "the traditional summer blackout" that iced the market in 1998 looks unlikely this year, according to Tom Taulli, author of "Investing in IPOs: New Paths to Profit" (Bloomberg Press, 1999).
Adding to this year's momentum, he said, are the rising allotments of IPO shares to individuals via Internet brokerages. That is feeding enthusiasm.
* Some to Watch:
Taulli said California offerings that could make a second-half splash include San Diego-based MP3.com (proposed ticker symbol: MPPP), a pioneer in music downloading that "has generated a lot of buzz even though it's controversial because of copyright issues."
Gail Bronson, senior analyst at the IPO Monitor Web site, said MP3 and online music competitor Liquid Audio (LQID) of Redwood City, "both should be rockets. They're in two great areas. Who doesn't love music? And when you couple that with the Internet--wow!"
She also said online entertainment programmer Quokka Sports Inc. (QKKA) of San Francisco could be a winner. "Every male stockbroker is talking about it. That's all you need to know."
And Bronson said business-to-business specialist Tibco Software (TIBX) of Palo Alto "is going to be huge," noting the company's premier venture-capital, underwriting and corporate connections. Reuters Group and Cisco Systems are among the investors in the Goldman Sachs-managed offering.
Times staff writer Josh Friedman can be reached at email@example.com.
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Wheelin' and Dealin'
The first-half tally for California initial public offering proceeds eclipsed the state's six-month record set in the second half of 1993, according to Thomson Financial Securities Data. But California's 65 offerings fell far short of the record for number of deals, set in the first half of 1996.
First-half 1999: $4.6 billion
Number of deals
First-half 1999: 65
Source: Thomson Financial Securities Data