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The IPO Buzz
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The IPO Buzz: Lucky Side of the Ledger
A handful of IPOs exploded in Fridayís market much like an eruption from a smoldering volcano. They scored an average opening-day gain of nearly 40 percent. But the event that led up to Fridayís fireworks didnít just happen overnight.
This yearís IPO traffic is breaking down into two different markets: Pre-Labor Day and Post-Labor Day.
Investors who bought shares of companies that have gone public since Labor Day wound up on the lucky side of the ledger. The numbers tell the story.
{mosgoogle}The average opening-day gain of the IPOs priced since Labor Day is 18.1 percent. Thatís roughly twice the average opening-day gain of 8.9 percent for the IPOs priced during the first eight months of the year.
Hereís how the two different IPO markets of 2006 have taken shape so far.
Pre-Labor Day:
On Sept. 1, 2006, which was the Friday before Labor Day, the Nasdaq Composite Index, the barometer of the IPO market, ended at 2,193.16, DOWN 0.55 percent from its close at 2,205.32 on Dec. 30, 2005.
During those eight months, the new-issues calendar produced 136 IPOs, according to available records. That was an average of about 17 IPOs per month. They had an average opening-day gain of 8.9 percent.
On Sept. 1, 2006, the pre-Labor Day Scorecard (excluding unit offerings) looked like this:
  • IPOs priced: 105
  • Up: 50
  • Down: 53
  • Unchanged: 2
  • Average gain: 4.32 percent
  • Nasdaq Composite Index: Down 0.55 percent
Post-Labor Day:
On Dec. 9, 2006, the Nasdaq Composite Index closed at 2,437.36, UP 11.1 percent from Sept. 1, 2006.
During those three months and a week, the new-issues calendar produced 76 IPOs. That was an average of about 25 IPOs per month. They had an average opening-day gain of 18.1 percent.
On Dec. 9, 2006, the post-Labor Day Scorecard (excluding unit offerings) looked like this:
  • IPOs priced: 71
  • Up: 57
  • Down: 14
  • Average gain: 29.3 percent
  • Nasdaq Composite Index: Up 11.1 percent
That set the stage for last Fridayís explosive IPO results.
Heelys (Nasdaq: HLYS), the maker of kidsí shoes with wheels embedded in the heels, was the outstanding deal that caught the financial mediaís attention. The IPO was priced at $21 per share and hit an intraday high of $38.75 -- UP 84.5 percent from its initial offering price-- before closing at $32.60. That was still up 55.2 percent from its offering price.
The Heelys deal had been the ďpick of the weekĒ by many. Some were projecting an opening-day premium of $5 per share above its offering price. That proved to be conservative.
The demand was far greater than expected.
It enabled bankers to price 6.43 million shares at $21 each, well above the original filing range of 6.25 million shares at $16 to $18 each. The extra stock came from selling shareholders. They sold 3.3 million shares, up from an originally planned 3.13 million shares.
Allegiant Travel (Nasdaq: ALGT), a feeder airline, was Fridayís other hot IPO. It popped for an opening-day gain of 39.4 percent.
Once again, big demand allowed bankers to price 5 million shares at $18 each, above its filing range of $15 to $17 per share. The IPO opened at a premium of $6 per share  above its offering price and closed at $25.10 per share.
No Overnight Success
Worth noting: Last Fridayís IPO eruption just didnít happen overnight.
Itís been building for awhile.
First, thereís the strength of the stock market, specifically the Nasdaq Composite Indexís 11.1 percent gain since Labor Day. Second, thereís the sizzling IPO market, with an average gain of nearly 30 percent over the past 13 weeks. Those two factors opened the door for Wall Streetís bankers to price 20 IPOs for this week, which starts on Monday, Dec. 11.
The last time more IPOs were priced in a single week was two years ago during the week of Dec. 13, 2004. In that week, bankers got 21 deals out the door.
By the way, a couple of IPOs on this weekís calendar are catching a lot of buzz.
(For premium subscribers, please check the ďIPO SCOOP Rated Calendar.Ē)
Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums), is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with IPOScoop.com. The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute changes due to market conditions, changes in a specific offering and other factors, such as changes in the proposed offering terms and the shifting of investor interest in the IPO.
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