The IPO Buzz: Behind the IPO “March Madness”

There are many reasons. We’ll get to them later. But first, let’s look at this week.
The IPO calendar’s nine offerings are expected to raise over $1.4 billion. You have to reach back to the week of Dec. 6, 2010, when 10 deals were priced, to find a busier time in the land of IPOs.
The general consensus among the IPO handicappers is that there are two deals on the “most wanted” list this week: They are Annie’s and Millennial Media.
Going Organic
Annie’s, an organic and natural food producer, plans to price 5 million shares at $14 to $16 each on Tuesday evening. The IPO is expected to start trading Wednesday morning on the New York Stock Exchange under the proposed symbol “BNNY.” The joint-lead managers are Credit Suisse and J.P. Morgan. The co-managers are William Blair & Company, RBC Capital Markets, Stifel Nicolaus Weisel and Canaccord Genuity.
Based in Berkeley, California, Annie’s believes it has the No. 1 natural and organic market position in four product lines: macaroni and cheese, snack crackers, fruit snacks and graham crackers. The company’s line totals about 125 products, including pastas, cereals, dressings, condiments, and snacks. Formed in 1999, Annie’s has about 79 employees. It is owned by the private equity firm of Solera Capital
(Note: The company plans to offer 1.1 million shares and selling shareholders plan to offer 3.9 million shares.)
The MYDAS Touch
Millennial Media, a mobile ad software company with a platform named MYDAS, plans to price 10.2 million shares at $9 to $11 each on Wednesday evening. The IPO is expected to start trading Thursday morning on the New York Stock Exchange under the proposed symbol “MM.” The joint-lead managers are Morgan Stanley, Goldman Sachs and Barclays Capital. The co-managers are Allen & Company and Stifel, Nicolaus Weisel.
Based in Baltimore, Millennial Media is an independent mobile advertising platform company. MYDAS, its proprietary ad platform, is compatible with Apple, Android and BlackBerry, as well as other cellphones, smartphones and wireless tablets. Millennial Media offers advertisers audience reach, targeting capabilities and the ability to deliver ad experiences to consumers on their mobile connected devices. Its MYDAS platform offers developers ways to deliver ads from
more than 7,000 different types of mobile devices. Formed in 2006, Millennial Media has about 222 employees. It believes it is the second-largest mobile advertiser in the United States.
(Note: The company plans to offer 9.2 million shares and selling shareholders plan to offer 1 million shares.)
There are nine stories in this week’s IPO calendar. These are two.
The Wrong Kind of Attention
Last week had an unusual story – the death of an IPO.
BATS Global Markets, based in Lenexa, Kansas, is an electronic securities exchange operator. (Those letters, BATS, form an acronym for “better alternative trading systems.”) The deal was expected to draw attention. It did.
On Thursday evening, the company priced 6.3 million shares at $16 each. (Note all the shares being offered were from selling shareholders.) The stock was scheduled to trade on its own exchange – the BATS Exchange. It did.
But not for long.
It opened Friday morning at $15.25 and traded about 1.2 million shares before trading was halted. Later in the day, an announcement was made that the deal had been withdrawn.
There was one question that was repeatedly asked, but the financial media had no answer: “How could they do it? The stock was trading.”
Every now and then, maybe once a decade, something happens to a company whose IPO had been priced, was trading and then withdrawn – like BATS. The answer:
The trades are not consummated until settlement date.
Until then, no money changes hands, no stock changes hands and the trades are on paper. Pulling the deal ahead of settlement date wipes every trade off the books.
Behind the Surge
Now turning back to today’s surging IPO market.
There are reasons for the pickup in activity. Consider:
  • To begin with, there’s the intense focus of the financial media. They have created a frenzy over the pending Facebook IPO.
  • Next, the Nasdaq Composite Index, the barometer of the IPO market, is now at a 12-year recovery high.
  • This year’s IPOs are up an average of about 29 percent from their initial offering prices, as of Friday’s close. The Nasdaq Composite was up 17.8 percent for the year, the S&P 500 up 11.1 percent and the Dow Jones Industrial Average up 7.1 percent.
  • Over the past few weeks, almost 50 companies have filed S-1/A amendments updating their IPO registrations.
  • This is spilling into the IPO calendar and the calendar is coming together.
And this brings us back to this week.
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