Florida Bank’s IPO Offers Hope
With initial public offerings scarce as ever after three years of a punishing bear market, IPO stands for something different these days: “It’s pretty obscure.”
Bancshares of Florida snapped the IPO market out of its eight-week drought Monday, but the largely unknown regional bank, based in Naples, Fla., did so with a whimper, selling 900,000 shares to the public at $10 each in a deal that grabbed little attention on Wall Street.
The stock will begin trading today on Nasdaq under the symbol BOFL. At $9 million, some analysts called the deal “inconsequential” -- except that it’s the first new stock sold since Dec. 18.
With the IPO door cracked open again, the question is whether far larger offerings can begin to squeeze through, reviving hope among scores of companies that would like to go public this year.
Today’s expected IPO pricing of San Diego-based mortgage lender Accredited Home Lenders Holding Co., which is hoping to raise about $100 million, may provide a key test for the market.
Only 84 companies went public last year, the slowest pace in more than a decade. A total of 65 firms are in the IPO pipeline for this year, but few have set an expected date, given how skittish investors are about the stock market in general and about new shares in particular.
Although January is typically a slow month for IPOs, which often heat up in February and March, the lack of a single deal last month was rare, analysts said.
“This does not bode well,” said Tom Taulli, a corporate finance instructor at USC and author of “Investing in IPOs.” Taulli said he believes that this was the first January IPO shutout since 1974.
“It’s going to take a really sharp piece of business to make investors take notice” of IPOs again, said Ben Holmes, editor of Morningnotes.com, a stock research service in Boulder, Colo. “I’m not saying it will be, but Accredited could be the one that makes people say, ‘Yeah, that company makes a lot of sense.’ ”
Accredited is a so-called sub-prime mortgage lender, targeting borrowers who have spotty credit records. The company has been profitable, but analysts say a big question is whether investors will be willing to buy into the deal amid concerns about future loan default rates, should the economy slide.
Investors who have been watching the performance of last year’s IPOs also might be simply concerned about their odds: Of the 14 IPOs that came to market from Nov. 7 to Dec. 18, half are trading below their offering prices. Fast paper losses on IPOs can sour investors on taking chances on other deals.
There have been a few stars among recent new stocks. One is Portfolio Recovery Associates Inc., which collects defaulted credit card debt.
Norfolk, Va.-based Portfolio Recovery, which rose $1.35 on Monday to $22.50 on Nasdaq, is up 73% from its November offering price of $13.
Other recent gainers have included two health-care companies -- Scottsdale, Ariz.-based VistaCare Inc. and Mountain View, Calif.-based Impac Medical Systems Inc.
But one of the biggest IPO deals of last year, Scotts Valley, Calif.-based Seagate Technology, illustrates why many people are nervous about new stocks: Shares of the disk-drive maker sank to a new low of $8.70 on Monday, down 28% from the IPO price of $12 in December.
Cosi Inc., a New York-based cafe chain, closed Monday at $3, down 57% from its November offering price of $7.
No wonder companies in the IPO pipeline are finding that it remains “very much a buyer’s market,” said David Menlow, president of IPO Financial Network in Milburn, N.J.
Infinity Property & Casualty Corp., which offers “nonstandard” insurance to drivers who have difficulty obtaining coverage, is a case in point, Menlow said: Lead underwriters Credit Suisse First Boston and Merrill Lynch & Co. have cut the expected size of the deal twice recently in shopping it to investors.
The Birmingham, Ala., company originally was expected to fetch $21 to $24 a share, but the deal was scaled back last week to $18 to $20. On Monday the underwriters trimmed the expected offering price range again, to $16 to $17.
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How recent IPOs have fared
Of the last 14 companies to go public, half now are trading above their initial offering prices and half are trading below.
*--* IPO IPO Mon Pctg Company (ticker) date price price chng Ohio Legacy(OLCB) 12/18 $8.50 $8.41 -1% VistaCare(VSTA) 12/17 12.00 15.03 +25 Commercial Capital(CCBI) 12/17 8.00 8.41 +5 Crosstex Energy(XTEX) 12/11 20.00 23.20 +16 Seagate Technology(STX) 12/10 12.00 8.70 -28 Chicago Merc. Exchg.(CME) 12/5 35.00 43.00 +23 Safety Insurance(SAFT) 11/21 12.00 13.40 +12 Cosi(COSI) 11/21 7.00 3.00 -57 Impac Medical Sys.(IMPC) 11/19 15.00 19.85 +32 Constar Intl.(CNST) 11/14 12.00 8.20 -32 Somerset Hills Banc.(SOMH) 11/12 8.25 7.80 -5 Si Intl.(SINT) 11/11 14.00 10.93 -22 WellChoice(WC) 11/7 25.00 20.01 -20 Portfolio Recovery(PRAA) 11/7 13.00 22.50 +73
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Source: Thomson Financial
