The IPO Buzz: A Page from the Past

The IPO calendar borrowed a page from the past last week, but most of the experts just skipped over it. The lessons were clear: Read the prospectus – and pay attention to the old saying – “Cut a deal, cancel my order.”

Most of the services reported that the calendar listed three IPOs. In reality, there were two IPOs and one offering of American Depositary Shares(ADS) representing a listed stock already traded in non-U.S. capital markets.

The IPOs on the calendar were Ranger Energy Services (RNGR) and YogaWorks (YOGA) plus the ADS offering of Zealand Pharma A/S (ZEAL/ZEAL.CO).

Note: On Thursday, Aug. 10, YogaWorks was added to the calendar while Contura Energy, a diversified provider of met (metallurgical) coal and steam coal to a global customer base, was postponed and then withdrawn.

ECON 101

Let’s go back to the books. Reading Wall Street’s tea leaves – or what is known as the final prospectus – usually tells the reader how an IPO might perform in the aftermarket.

Compare an IPO’s final prospectus with its previous prospectus and if the final document shows a reduction in the pricing terms, such as the price range, that is usually a sign of weak demand at the higher price. This is the classic ECON 101 lesson – oversupply versus lack of demand – usually does not produce an opening-day moonshot for an IPO. The U.S Securities and Exchange Commission’s records back up the theory.

From January 2001 through August 2017, the SEC data shows 2,421 IPO pricings.

(This excludes the usual offerings, such as unit offerings, bank conversions, “best efforts” offerings, blank checks, closed-end funds, companies trading on the OTC markets moving over to the NASDAQ and foreign-traded securities making their debuts in the U.S. capital markets. The latter are public offerings. Investors can buy the underlying shares on foreign exchanges before their U.S. pricing dates.)

Of the number above, 869 IPOs were priced below their original offering terms. The priced deals showed an average opening-day gain of 1.9 percent versus an average opening-day gain of 14.15 percent for all 2,421 IPOs priced during that period of almost 17 years. For the 1,552 IPOs priced within or above range, the average opening-day gain was an eye-popping 19.0 percent.

With those stats in mind, let’s take a look at last week.

Running on Empty

Ranger Energy priced about 5.9 million shares at $14.50 each on Thursday, Aug. 10. The previous prospectus listed an offering price at $16 to $18. The lower pricing was a surprise. The professionals reported that the deal was oversubscribed and expected to trade at a premium. It didn’t.

The old expression applied: “Cut a deal, cancel my order.” Ranger Energy opened Friday, Aug. 11, at $14, down 50 cents, and closed at $14.22, down 38 cents from its IPO price.

Ranger Energy Services is an independent provider of high-spec well service rigs and associated services in the United States. The company operates in most of the active oil and natural gas basins in the United States, including the Permian Basin, the Denver-Julesburg Basin, the Bakken Shale and the Eagle Ford Shale, the prospectus said.

Downward Dog

YogaWorks priced 7.3 million shares at $5.50 each on Thursday. The previous prospectus listed an offering of 5 million shares at $12 to $14. The deal had previously been postponed. The professionals expected that the deal would be priced at the low end of the range, show a “dead-cat bounce” and trade up in the aftermarket. It didn’t.

The old expression applied: “Cut a deal, cancel my order.” The YogaWorks opened at $5.50 on Friday, Aug. 11, and closed at $4.85, down 65 cents from its IPO price.

YogaWorks is one of the largest providers of quality yoga instruction in the United States. YogaWorks booked about 3 million student visits in 2016. The company owns 50 yoga studios and offers online classes through its Internet-based digital media service called

Drug Bust

Zealand Pharma priced about 4.4 million ADS at US$17.87 each on Tuesday night, Aug. 8. The final prospectus showed the underlying stock last traded on the NASDAQ Copenhagen at DKK118.50 or US$18.31.

The deal was a secondary offering, priced below its previous close. It closed on Wednesday, Aug. 9, its opening day, at $17.82, down 5 cents.

Zealand Pharma A/S, based in Glostrup, Denmark, is a biotechnology company focused on the discovery, design and development of innovative peptide-based medicines. The company has two approved products to treat Type 2 diabetes.

(For more information about these companies, please check the IPO profiles found on’s website.)

Late August Siesta

This week’s slate is as clean and green as the fairways on early Sunday morning and that trend spills over into the week of Aug. 21. But not to worry, this is Wall Street’s usual end-of-summer siesta leading up to the Labor Day holiday.

Stay tuned.

Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinion.