First, bankers priced 13 IPOs last week. They raised $2.3 billion. There have been other weeks when more IPOs were priced. There have been other weeks when more money was raised.
Here’s the record breaker: None came the week ahead of Christmas.
In 2005, three IPOs were priced the week ahead of Christmas. They raised $196 million. To underscore the rarity of IPO traffic during the week before Christmas, you have to reach back almost a decade to find any IPO activity. It was in 1997 and one deal was priced.
On Dec. 23, 1997, Friedman Billings Ramsey (NYSE: FBR), priced 11 million shares at $20 each. It’s been a rocky road for the buyers of its IPO. Nine years later, on Dec. 22, 2006, FBR closed at $8.04 per share, DOWN 59.8 percent from its initial offering.
Charge of the Chinese IPOs
The next record breaker came from China.
Four Chinese IPOs made their debuts in the U.S. capital markets last week. No other week witnessed that many Chinese IPOs attending the debutantes’ ball at the corners of Broad and Wall Streets, according to available reports.
The high-profile Chinese IPOs turned in disappointing aftermarket results:
Melco PBL Entertainment (Macau)(Nasdaq: MPEL) was dubbed “the pick of the week” by many. That assessment was based upon an offering of 53 million shares at $16 to $18 each. One IPO handicapper was even calling for a $30 stock in the aftermarket.
The company’s investment bankers scraped a lot of aftermarket orders off the table when they increased the size of the offering to 60.3 million shares. That pushed the greenshoe to over 9 million shares and, if exercised, would increase the deal to nearly 70 million shares.
The IPO was priced at $19 per share and closed the week at $19.51, UP 2.68 percent.
What happened in the aftermarket was a simple case of ECON 101 -– supply versus demand. Increasing the supply absorbed the demand and watered down the expected aftermarket pop.
Trina Solar (NYSE: TSL) and Solarfun Power Holdings (Nasdaq: SOLF) were solar companies that did not glow in the aftermarket.
Trina Solar came out of the starting gate with a roar. Bankers priced 5.3 million shares at $18.50 each, well above its filing range of $13.50 to $15.50 per share. The IPO opened at $26, bubbled up to $26.75 and tanked. It closed the week at $19.85, UP 7.3 percent from its initial offering price, but DOWN 23.7 percent from its opening price.
Both the Melco and Trina deals started trading on Tuesday, Dec. 19. That set the stage, and disappointment, for the Solarfun deal. It was priced that evening and started trading on Wednesday, Dec. 20.
When Solarfun was priced at $12.50, the mid-point of its $11.50- to $13.50-per-share filing range, it sent a message that the sparkle was out of the deal. Had it remained hot, it could have been priced above range, like Melco and Trina.
Solarfun’s SCOOP rating (Street Consensus of Opening Premiums) was 3 stars. Before the pricing terms were announced, most of the handicappers were looking for an opening pop of $1 per share, and one was projecting as much as $3 per share.
It didn’t happen.
The deal opened at $12.50, collapsed to $9.91 and closed at $9.96, DOWN 20.3 percent from its initial offering price.
The consensus making up the SCOOP ratings looks at the expected sizzle, not at the steak. And the buzz was “hot” for the Chinese IPOs.
What got overlooked was an earlier Chinese solar IPO, Canadian Solar (Nasdaq: CSIQ).
On Nov. 18, Canadian Solar priced 7.7 million shares at $15.50 each. Its price started melting away after it began trading.
On Tuesday, Dec. 19, the day Trina started trading and Solarfun was priced after the close, two of Canadian Solar’s investment bankers initiated research coverage.
Neither recommendation was a strong endorsement.
Joint-lead manager Deutsche Bank rated Canadian Solar a “Hold” with a $10 price target. Note: Canadian Solar closed that day at $10.30 per share.
And co-manager CIBC World Markets rated the IPO a “Sector Perform.”
In a nutshell, last week’s two solar deals got caught up in the sizzle of Chinese IPOs.
But that’s not all, folks!
Blank Checks Are Baaccckkk, Baby
The final record breaker was the return of the “blank check” companies. If you thought these IPOs were dead, you might want to think again.
Bankers priced five SPACs (specified purpose acquisition companies) last week. They raised $584 million. That was a record week for the issuance of “blank check” offerings. And, fittingly, the week’s IPO production line ended with a SPAC. It was:
Freedom Acquisition Holdings (AMEX: FRH-U) priced 48 million units at $10 each to raise $480 million on Thursday evening. The deal was increased by 60 percent from its original filing of 30 million units. The IPO opened and closed at $10 per unit to end a record-breaking week in the IPO market.
This week’s calendar is not expected to set any records. It is clean and green -– nothing is scheduled to be priced.