Nasdaq’s Hiccup Gives IPO Watchers Only a Brief Scare
Investment bankers, venture capitalists and technology entrepreneurs held on to their chairs last week as a three-day tech-stock tumble drove down the Nasdaq composite index nearly 10% before its furious recovery Friday.
By the end of the tumultuous week, fears had subsided that the tech sell-off might lead to a freeze in the often-jittery market for initial public stock offerings.
Indeed, many investors and bankers said they were hopeful that the IPO market will get rolling this week, even though the year’s calendar typically starts slowly. Most are nonplused about the near-correction in the Nasdaq index, which posted an unheard-of 86% gain in 1999, thanks in part to sizzling new stocks.
Some IPO watchers sounded almost relieved to see the Nasdaq down from its peak. It ended Friday off 6% from last Monday’s record close.
“A couple of days ago I was worried, but now I see that the market is sane,” said Hank Barry, a partner with Hummer Winblad Venture Partners of San Francisco, which invests in Internet companies. “I think the days of market exuberance over anything that has ‘net’ in it are over. People are taking a hard look at companies.”
In a sign of the IPO market’s stability, just three companies--Powerize.com, a Maryland-based Internet finance and business information firm; Goracing.com, a Phoenix motor sports Web site; and D.E. Frey Group, a Denver brokerage--officially withdrew their IPO registrations last week. By contrast, last year averaged about four withdrawals a week, according to data firms IPO Monitor of Calabasas and CommScan of New York.
In a Securities and Exchange Commission filing Friday, Powerize.com blamed its IPO withdrawal on “market conditions.” But analysts noted that is a traditionally convenient culprit.
Historically, the first few weeks of the year are light for IPOs, as few investment bankers return from the holidays only to immediately depart on the roadshows they use to sell investors on their deals.
Many bankers predicted that most deals will be priced as expected this month, though several have been pushed back a week or two in fairly typical adjustments to the schedule.
“We don’t get caught up in a few days’ trading,” said Glenn Robson, a managing director with Morgan Stanley Dean Witter in Los Angeles. “We focus on companies that are leaders in their sectors and can go public any time.”
This week’s IPO calendar includes just one Southern California company, B2bstores.com of Long Beach, which operates a Web site for business-to-business commerce.
Companies on this month’s schedule were reluctant to speak publicly Friday about their IPOs because of the SEC-imposed “quiet period” surrounding offerings. But insiders at some of the firms said their plans were still on track, although they would consider altering their strategy if the market declines anew.
“At this point, they still intend on pricing,” said Ellen Taz, spokeswoman for B2bstores.
However, insiders at ValueClick, a Carpinteria company that helps firms direct online traffic to brick-and-mortar stores, said the firm might delay its planned offering until February for several reasons, including market conditions.
High-profile deals expected later in January include a $154-million offering from Buy.com, the Aliso Viejo-based online retailer being taken public by Merrill Lynch.
Among the largest upcoming deals is the $1.8-billion IPO by insurer John Hancock Financial Services. In an SEC filing Friday, Boston-based Hancock set the expected price of the 102 million shares it plans to sell at $16 to $18 each, the conservative end of the $15-to-$25 range initially specified.
After Friday’s 4.2% Nasdaq rebound, most financiers of local tech companies said they were optimistic about this year’s outlook.
“I don’t see any end in sight to the growth” of the tech sector, said David Cremin, partner at Zone Ventures, the Los Angeles arm of Silicon Valley venture firm Draper Fisher Jurveston. “People are working on new technologies right now that will lead to new growth spurts. Sure, the market goes up and down. You just hold on tight, and the sustainable and long-term business models will prevail.”
Zone recently closed on a new $75-million venture fund, with investors such as SunAmerica, the Los Angeles retirement savings giant, and now is looking for start-ups to finance. Zone has invested in and “incubated” such companies as EStyle, a Los Angeles-based online fashion-oriented retailer eventually expected to go public.
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Times wire services were used in compiling this report. Remember that initial public offerings are highly speculative and not suitable for all investors. Debora Vrana, who covers investment banking and the securities industry for The Times, can be reached at debora.vrana@latimes.com or at Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
