In 2006, 201 IPOs were priced, down from 202 IPOs in 2005.
The 2006 IPO market turned out to be a tale of two IPO markets: Pre-Labor Day and Post-Labor Day.
By the close of business on Friday, Sept. 1, 2006, the IPO calendar had turned out 105 IPOs, compared with 135 IPOs through Sept. 1, 2005. The IPO Scorecard at that point did not leave any room for barroom bragging. Here’s how it read on Sept. 1, 2006:
- Number of IPOs priced: 105
- Monthly average: 13.1 deals
- Up: 50
- Down: 53
- Unchanged: 2
- Average opening-day gain: 9.72 percent
- Percentage Change from Issue price: Up 4.32 percent
- The Nasdaq Composite Index: down 0.55 percent
Then the IPO market caught fire.
On Sept. 6, 2006, New Oriental Education & Technology Group (NYSE: EDU), a Beijing-based provider of educational programs, services and products, priced 7.5 million shares at $15 each, above the $11- to $13-per-share filing range. The IPO closed its opening day at $20.88 and, on Dec. 29, it ended at $33.54, UP 123.6 percent from its initial offering price.
Normally, the IPO production line does not kick into gear until mid-September, but 2006 proved to be different.
The answer was found in the barometer of the IPO market –- the Nasdaq Composite Index.
On July 21, the Nasdaq Composite closed at its 2006 low at 2,020.39. From that low-water mark, it ran up to 2,465.98, its closing high on Nov. 22. That was a gain of 22.1 percent.
In past years, it usually took the IPO market about six to eight weeks to come back to life after a stock market bottom. The year 2006 was no exception.
On Sept. 6, or about seven weeks after the Nasdaq Composite hit its low for the year, the New Oriental Education IPO was priced. And the Fall IPO market was open for business.
Then the IPO traffic picked up after Labor Day. From Sept. 6 through Dec. 20, 2006, a total of 96 IPOs were priced.
Here’s the breakdown: September produced 15 IPOs, October turned out 23 IPOs, November traffic totaled 29 IPOs and December wrapped up the year with 29 IPOs.
Here’s how the Fall IPO Scorecard read for the market’s performance post-Labor Day through the closing bell on Dec. 29, 2006:
- Number of IPOs priced: 96
- Monthly average: 24 deals
- Up: 75
- Down: 21
- Average opening-day gain: 17.7 percent
- Percentage Change from Issue price: Up 26.7 percent
- The Nasdaq Composite Index: Up 10.1 percent
At the close on Dec. 29, 2006, the last trading day of the year, the 2006 IPO Scorecard read:
- Number of IPOs priced: 201
- Up: 144
- Down: 56
- Unchanged: 1
- Average opening-day gain: 13.5 percent
- Percentage Change from Issue Price: 26.9 percent
- The Nasdaq Composite Index: Up 9.52 percent
That was a much better report card than in 2005.
Here’s how the 2005 IPO Scorecard read on Dec. 30, 2005:
- Number of IPOs priced: 202
- Up: 121
- Down: 80
- Unchanged: 1
- Average opening-day gain: 14.1 percent
- Percentage Change from Issue Price: 20.7 percent
- The Nasdaq Composite Index: Up 1.37 percent
Thanks to the surge in the Nasdaq Composite Index in the last four months of the year, 2006’s IPO market turned out much better than 2005’s.
Crystal Ball for the New Year
And what can you expect in 2007?
It should pick up where right where it left off at the end of 2006 – hot, hectic and full of tasty deals.
Note: The above figures exclude unit offerings consisting of common stock plus warrants. Tracking a unit offering’s aftermarket performance becomes difficult once the unit is separated into common stock and warrants. For the record, 2006 produced 39 unit offerings, up from 34 unit offerings in 2005. That would raise 2006 to 240 deals and increase 2005 to 236 offerings.