The IPO Buzz: Getting a Clue

Here are two things to watch: (1) the stock market and (2) the U.S. Securities and Exchange Commission’s filing window. But before getting into this, let’s take a look at last week.
 
A Market for IPOs
The week’s headliner was the highly touted Intrepid Potash (NYSE: IPI), a producer of the sought-after fertilizer known as potash. The IPO more than lived up to expectations. Bankers priced 30 million shares at $32 each, well above the deal’s original filing range of 24 million shares at $24 to $26 each. The IPO closed the week at $51.94 per share, UP 62.3 percent from its initial offering price.
 
The rest of the calendar -– three deals — behaved much like this year’s IPO traffic. They finished the week with a mixed performance -– two up, one down. Those three had an average opening-day gain of less than 1 percent -– 0.96 percent to be exact.
 
This been the pattern of this year’s 16 IPOs -– a couple of noteworthy winners and the rest largely forgettable. Among the other winners were:
  • Visa (NYSE: V), which closed Friday, April 25, at $75.10 per share, UP 70.7 percent from its initial offering price of $44 per share.
  • Heritage-Crystal Clean (Nasdaq: HCCI), which closed Friday at $18.45, UP 60.4 percent from its offering price of $11.50 per share.
  • IPC The Hospitalist Co. (Nasdaq: IPCM), which closed at $23.23, UP 45.2 percent from its offering price of $16 per share.
The other 12 of 2008’s IPOs closed Friday with an average gain of 0.22 percent from their initial offering prices.
 
The Stock Market
On March 10, 2008, all the popular averages closed at their year’s lows. That was seven weeks ago. Consider the following:
  • The Dow Jones Industrial Average closed Friday at 12,891.86, UP 9.81 percent from 11,740.16, its closing low.
  • The Nasdaq Composite Index closed Friday at 2,422.93, UP 11.7 percent from 2,169.34, its closing low.
  • The S&P 500 closed Friday at 1,397.84, UP 9.77 percent from 1.273.37, its closing low.
Time and improving stock prices can change “a market for IPOs” into “an IPO market.” Keep one eye on the stock market. If it continues to improve, keep another eye on the SEC filing window.
 
The SEC Filing Window
Now for the naysayers with their doom-and-gloom stories of a massive number of companies withdrawing plans to go public. Maybe that’s the story around the world, but investing in most of those foreign deals is a closed door to the American investing public. These offerings were not filed with the SEC.
 
Here are the IPO numbers from the SEC’s filing window since March 10:
  • 26 companies filed to go public, looking to raise $4.6 billion.
  • 9 companies withdraw plans to go public, looking to raise $775 million.
Hardly a tale of gloom and doom!
 
Once again, here’s what to watch for: The amended or S1/A filings. These are the reports with updated financials and proposed pricing terms. The latter is the major clue that the company is going forward with its plans to go public.
When this happens, bankers usually move the deal from the IPO pipeline -– a holding pattern -– to the IPO calendar with a pricing date.
 
In conclusion: You need (1) a good stock market to get IPOs out the door and (2) when a company starts filing S/1A reports with pricing terms, there’s a good chance the deal will soon appear on the IPO calendar with a pricing date.
In the meantime, all one can do for now is to sit back and watch for the clues.