The IPO Buzz: A Winning Script

By week’s end, each of the leading stock market indexes had gained over 3 percent after the rate cut, and the only IPO on the launching pad exploded to nearly double its offering price.
athenahealth (Nasdaq: ATHN) priced 6.3 million shares at $18 each on Wednesday evening. That was above its $14- to $16-per-share filing range. It opened Thursday morning at $30 and sold as high as $38.74, UP 115.2 percent from its initial offering price. The IPO closed its opening day at $35.50, UP 97.2 percent from its offering price.
The Watertown, Massachusetts-based company is a provider of Internet-based business services for physician practices, which include automated and managed billing-related functions and a medical practice management platform.
The athenahealth IPO rekindled images of the “insanity dot-com” era of 1998, 1999 and 2000 where any Internet IPO zoomed off into outer space.
Formed in 1997, athenahealth is a classic dot-com deal from yesteryear –- soaring revenues, surging losses and millions in accumulated deficits.
Consider this: For the three months ended June 30, 2007, athenahealth had a net loss of $4.9 million on revenues of $24.5 million.
For the three months ended March 31, 2007, athenahealth reported a net loss of $1.2 million on revenues of $21.9 million.
And the company reported an accumulated deficit of $71.2 million as of June 30, 2007.
There’s more.
The company said in its prospectus it is not certain it will become profitable and expects its costs and operating expenses to increase in the future as it expands its operations — all tell-tale signs of an Internet IPO from the past.
“Fantastick” Voyage
This leads us to another question from that era, with a nod to the legendary off-Broadway play, “The Fantasticks”:
— Can you remember that day in September — Sept. 24, 1998 — to be exact?
That was the day eBay (Nasdaq: EBAY) priced its IPO of 3.5 million shares at $18 each. It opened at $53.50 and closed its opening day at $47.38, UP 163.2 percent from its initial offering price. (Since then, eBay’s stock has split four times and its adjusted initial offering price is 75 cents per share. On the eve of the ninth anniversary of pricing its IPO, eBay closed on Friday, Sept. 21, 2007, at $39 per share.)
However, the eBay IPO was only one of three companies to go public in September 1998, according to U.S. Securities and Exchange Commission filings.
The underlying stock market was on a downslide.
On July 20, 1998, the Nasdaq Composite Index closed at its then-high of 2,014.25 and then retreated to its 1998 closing low of 1,419.12 on Oct. 8, a decline of 29.5 percent. Five weeks later, EarthWeb priced its IPO of 2.1 million shares at $14 each on Nov. 11 and closed its opening day at $48.69 — UP 247.8 percent.
The “insanity dot-com” era was open for business.
On Dec. 31, 1998, the Nasdaq closed at 2,192.69, UP 54.5 percent from its October closing low.
Nine years later brings us to the week of Sept. 24, 2007. Today’s stock market is on the upswing -– thanks to the Fed. And ditto the IPO calendar.
The Nasdaq Composite Index closed on Friday at 2,671.22, UP 14.7 percent from 2,350.66, its March 5 closing low, and UP 6.8 percent from 2,500.64, its summer closing low on Aug. 28.
From Blue Sky to Blue Chip
Bankers have a new-issues calendar this week boasting seven deals. They are looking to raise $1.3 billion.
However, there are no Internet deals on this week’s calendar. Among the planned offerings are two SPACs, or “special-purpose acquisition companies” as they are known; a carryover from last week and two IPOs on the IPO professionals’ “Most Wanted” list. They are Babcock & Brown Air Limited (NYSE: FLY proposed) and Duff & Phelps (NYSE: DUF proposed).
Babcock & Brown Air, based in Dublin County, Ireland, is a newly organized company formed by Babcock & Brown to acquire commercial jet aircraft and other aviation assets to lease under long-term contracts to a diverse group of airlines throughout the world. The company’s initial portfolio will consist of about 47 commercial jet aircraft.
Here’s what makes this deal interesting: Babcock & Brown has agreed to service and manage the company’s portfolio.
Babcock & Brown has over 25 years of experience in the aircraft industry. It believes it is the fifth-largest aircraft leasing company in the world with over 240 aircraft leased to more than 140 airlines. Upon the completion of the offering, Babcock & Brown will own about 13.2 percent of Babcock & Brown Air.
Duff & Phelps, formed in 1932, is a New York City-based provider of independent financial advisory and investment banking services to a global client base through offices in 21 cities located in seven countries.  
Here’s what makes this deal interesting: Duff & Phelps is a blue-chip investment services firm going public at the ripe age of 75. That’s right. Duff & Phelps has been around 75 years. The stock should find a home in a lot of institutional accounts –- many of which probably are Duff & Phelps subscribers. It may be viewed as a safe way to own yet another piece of the Street.