Week’s IPOs Pass $10 Billion in Y2K Rush

Highlighted by the gigantic United Parcel Service Inc. and Charter Communications Inc. deals, this week has become the first in history to crack the $10-billion mark for initial public stock offerings and the eighth straight $1-billion week for IPOs.

Across the board, equity is being issued at a record pace. With $52 billion raised so far this year, IPOs are up 40% over last year’s pace, and secondary stock offerings, at $84 billion year to date, are up 18%, according to Thomson Financial Securities Data.

But after the equity deluge of the last two months, Wall Streeters say, December may look like a trickle.

That’s because corporations and their investment-bank advisors decided, as far back as January, to avoid issuance in the weeks before year-end due to caution about the potential year 2000 computer problem. Stock deals--especially IPOs--typically take at least six months to prepare.

“Volume in the last month has been abnormally high because people moved deals forward” to dodge Y2K, said Richard Bartlett, head of the U.S. equity syndicate for Citigroup Inc.’s Salomon Smith Barney unit.

Stock issuance “will drop off materially in December,” he added.

While much of Wall Street expects Y2K to be a nonevent in terms of computer problems, Bartlett said the distortions in the calendar of stock offerings amount to “a self-fulfilling prophecy.”

UPS raised a record $5.47 billion in its deal Tuesday. That was on top of the $3.23 billion raised Monday by Charter.

Bond issuance, meanwhile, is down significantly from year-ago levels, but Y2K is not the most significant factor, analysts said.

About $75 billion in junk bonds has been issued so far this year, down 37% from the $120 billion raised through this date in 1998, according to Securities Data.

Since Oct. 1, overall fixed-income deals have totaled $90 billion, down 25% from the corresponding period of 1998.

In late October and early November of last year, bond yields were lower than they are now as the market recovered from the Russian bond default, helped along by three Federal Reserve Board interest rate cuts.

The climate was so attractive that many deals that normally might have been done in early 1999 were pushed to November and December, said bond strategist Tony Crescenzi of Miller Tabak Hirsch & Co. in New York.

This year, by contrast, rates are up and junk-bond defaults are at the highest level since 1991, making it impossible for some lower-quality issuers to come to market, he said.

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Eye-Opening IPOs

Two of the four biggest U.S. initial public offerings ever were sold this week, headed by Tuesday’s $5.47-billion deal from United Parcel Service. Though most of the stocks have been solid performers in their first day of trading, they haven’t seen the huge jumps of some Internet-based IPOs.

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Deal size IPO IPO 1st day Company (ticker) (billions) date price % chg. United Parcel (UPS) $5.5 11/9/99 $50.00 NA Conoco (COC/B) 4.4 10/21/98 23.00 +8.2% Goldman Sachs (GS) 3.7 5/3/99 53.00 +32.8 Charter Comm. (CHTR) 3.2 11/8/99 19.00 +19.7 Lucent Tech. (LU) 3.0 4/3/96 6.75 +13.4 Infinity B’casting (INF) 2.9 12/9/98 20.50 +14.9 Fox Entmt. (FOX) 2.8 11/10/98 22.50 +8.9 Pepsi Bottling (PBG) 2.3 3/30/99 23.00 -5.7 Allstate (ALL) 2.1 6/2/93 13.50 +8.8 Associates First (AFS) 1.9 5/7/96 14.50 +19.8

Tues. Company (ticker) close United Parcel (UPS) NA Conoco (COC/B) $27.00 Goldman Sachs (GS) 71.88 Charter Comm. (CHTR) 22.75 Lucent Tech. (LU) 73.25 Infinity B’casting (INF) 34.06 Fox Entmt. (FOX) 20.88 Pepsi Bottling (PBG) 17.00 Allstate (ALL) 29.88 Associates First (AFS) 35.13

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NA: Not available (UPS begins trading today)

Sources: Thomson Financial Securities Data, Times research, Bloomberg News