Investor Interest in IPOs May Be Fading Again
The recent revival of demand for initial public stock offerings may have stalled out.
Shares of 150-year-old mutual life insurance company Phoenix Cos. dropped 4.2% on Wednesday, in their first trading session.
The stock (PNX) eased 74 cents to $16.76 on the New York Stock Exchange after the company sold nearly 49 million shares late Tuesday at $17.50 each.
Though the IPO price was above expectations, it’s bad publicity for a stock--and the firm’s underwriters--when the issue can’t hold above its IPO level on the first trading day.
The Hartford, Conn.-based insurer, converting from policyholder control to stock ownership, raised $854 million in the IPO.
Companies such as Phoenix and Kraft Foods Inc. are increasingly pushing brokerage underwriters for maximum prices for their IPOs, but that can lead to disappointment for investors when the stocks begin trading.
Kraft (KFT) sold shares last week at $31 each after boosting the asking price. The deal was the second-biggest IPO in U.S. history, raising $8.7 billion for the food giant. But the stock closed Wednesday at $30.30, a 2.3% paper loss to investors who bought into the IPO.
As an insurer, Phoenix’s strategy is to exploit the growing demand for retirement investing products from aging baby boomers. Demand is increasing among the affluent for estate tax and financial planning services, where profit margins are higher than in the firm’s traditional life insurance business.
