The IPO Buzz: Behind the Bare IPO Shelves

Even though the Nasdaq Composite Index closed on Friday, Nov. 23, at 2,966.85, UP 13.9 percent for the year, the Nasdaq is struggling to escape the clutches of a stock market correction. That happened on Nov. 14 when the Nasdaq closed at 2,846.81, DOWN 10.6 percent from its previous closing high of 3,183.95, set on Sept. 14.
Worth remembering: When the Nasdaq Composite pulls back, the IPO calendar has a tendency to dry up. This is not the first time it happened this year. Let’s look back.
On June 1, 2012, the Nasdaq Composite closed at 2,747.48, DOWN 11.9 percent from 3,119.70, its previous closing high set on April 2. Note: June 1 was a bad day – the Nasdaq lost 79.86 points. By then, the calendar had dried up.
The last IPO that was priced during the stock market’s April-to-June downturn came on May 17: Facebook (FB). And the first IPO that was priced after the June 1 low came on June 26: EQT Midstream Partners (EQM). That was about a four-week wait for the IPO calendar to come back from the market’s low.
Now back to the present. A four-week wait from the recent low set on Nov. 14 would carry us into mid-December. And that’s about the time when the IPO market historically closes down for the year.
Watch the Window 
But don’t give up on 2012. The new rules could help salvage December’s IPO market.
The Jumpstart Our Business Startups Act, or JOBS Act, has taken the transparency out of the IPO pipeline and gives no meaningful guidance to the IPO market.
Since the passage of the JOBS Act in April, a company can secretly file plans to go public at any time and then wait for the right market conditions to post its S-1 filing. Once the posting is made, the company’s IPO can go on the calendar in 21 days. Naturally, it is more complicated than that, but this is the way it can work.
Under these circumstances, that doesn’t give today’s IPO pipeline much of a shelf life.
In conclusion, don’t expect any IPOs to be priced this week. But keep an eye on the SEC’s filing window to get a feel for how December and the rest of year will play out.
Stay tuned.
Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.