The IPO Buzz: A Summer Legend

The summer months of June, July and August –- a quarter of the year –- on average have produced 27.5 percent of the annual IPO traffic, according to U.S. Securities and Exchange Commission filings dating back almost 40 years. To put that in perspective, an average quarter would produce 25 percent of the year’s IPO traffic. So summer’s traffic typically is 10 percent above average.
From January 1, 1970, through December 31, 2007, about 12,490 IPOs were priced. June, July and August produced 3,435 IPOs — or 27.5 percent of the new issue volume over that 38-year volume.
There are, however, a couple of times during the summer when the IPO calendar hits some speed bumps. That slows things down and even stops the traffic momentarily. Maybe that’s how the summer doldrums story came into play.
The first speed bump begins with June. The month begins right after the Memorial Day holiday. The next speed bump is the July 4th holiday where new-issue traffic generally slows down a few days before and a few days after the long Independence Day holiday weekend. (This year, the 4th of July falls on a Friday.) Then the final speed bump comes in mid-August when everything shuts down running into the Labor Day break.
Summer Crops
But the record books show that bankers can still make hay while the sun shines between the summer holidays.
Here’s another ironic twist. The busiest IPO summer did not come during the Internet bubble. It was the summer of 1986, when bankers priced 248 IPOs, or 34.1 percent of the year’s 728 IPOs.
The second-busiest IPO summer was in 1996, when bankers priced 220 IPOs, or 25.2 percent of the year’s 874 IPOs.
The third-busiest IPO summer was in 1993, when bankers priced 217 IPOs, or 26.5 percent of the year’s 820 IPOs.
Don’t look for 200 or more IPOs to be priced this year; market conditions are just not there. Nevertheless, if history is to repeat itself, then there’s something to look forward to in coming years.
Solo Act
This brings us to this week, when the only deal on the calendar is Fifth Street Finance (NSYE: FSC proposed). It is not OGE Enogex Partners L.P. (NYSE: OGP proposed), as many have been reporting.
Note: Various IPO reporting services started adding the OGE Enogex deal to their calendars early last week. However, the only IPO calendar that really matters is that of the lead or the joint-lead managers. OGE’s joint-lead managers are UBS Investment Bank and Lehman Brothers and neither had this deal on their respective calendars.
OGE Enogex is an Oklahoma City-based natural gas transmission limited partnership. The company plans to offer 7.5 million common units at $16 to $18 each sometime in the future. The proposed offering price has been reduced twice. The initial price range was $19 to $21, then reduced to $18 to $20 and finally to its present price range of $16 to $18 per share.
Fifth Street Finance is a New York City-based closed-end investment company investing in small to medium-sized companies with annual revenues between $25 million and $250 million. The company plans to offer 10 million shares at $14.24 to $15.12 each. It is expected to trade on Thursday.
Ordinarily does not report on closed-end offerings. But it’s the only game in town this week.