The IPO Buzz: Curtain Raisers

 
On Thursday evening, Jan. 11, Legacy priced 6 million common units at $19 each. That was on the low end of its $18.50-to-$20.50 price range. On Friday, the IPO opened at $19 and closed at $20.30, up $1.30 per unit.
 
It was a good start for this year’s IPO market, but not an unusual start for the IPO market in general.
 
However, here’s something most might not know.
 
Over the past few years, the IPO market’s curtain raisers normally get off to a good, but not spectacular start. By the end of the year, these curtain raisers generally outperformed the underlying stock market and, in many cases, by a wide margin. Consider this:
 
In 2006, the curtain raiser was priced on Jan. 12:
  • Linn Energy (NASDAQ: LINE) priced 11.8 million shares at $21 each and closed its opening day at $22 per share, up 4.76 percent from its initial offering price. On Dec. 29, 2006, Linn Energy closed at $31.95, UP 52.1 percent from its initial offering price. In 2006, the Nasdaq Composite Index gained 13.6 percent.
 
In 2005, three curtain raisers were priced on Jan. 20:
  • Celanese (NYSE: CE) priced 50 million shares at $16 each and closed its opening day at $16 per share, unchanged from its initial offering price. On Dec. 30, 2005, Celanese closed at $19.12, UP 19.5 percent from its initial offering price. In 2005, the Nasdaq Composite Index gained 1.37 percent.
  • SeaBright Insurance (NASDAQ: SEAB) priced 7.5 million shares at $10.50 each and closed its opening day at $12.05 per share, UP 14.8 percent from its initial offering price. On Dec. 30, 2005, SeaBright closed at $16.63, UP 58.4 percent from its initial offering price. In 2005, the Nasdaq Composite Index gained 1.37 percent.
  • ViaCell (NASDAQ: VIAC) priced 7.5 million shares at $7 each and closed its opening day at $8.69 per share, UP 24.1 percent from its initial offering price. On Dec. 30, 2005, ViaCell closed at $19.7, DOWN 19.7 percent from its initial offering price. In 2005, the Nasdaq Composite Index gained 1.37 percent.
 
Well, two out of three wasn’t bad. Their average aftermarket gain was 19.4 percent — much better than the Nasdaq’s 2005 performance. It eked out a marginal gain.
 
In 2004, the curtain raiser was priced on Jan. 8:
  • K-Sea Transportation (NYSE: KSP) priced 3.6 million shares at $22.50 each and closed its opening day at $27.09 per share, UP 15.3 percent from its initial offering price. On Dec. 31, 2004, K-Sea closed at $34.91, UP 55.2 percent from its initial offering price. In 2004, the Nasdaq Composite Index gained 8.59 percent.
 
In 2003, the curtain raiser was priced on Feb. 11. Yes, that’s right! Investors had to wait until February before bankers could get the year’s first IPO off the launching pad. And then it was anything but a barnburner:
  • Bancshares of Florida (NASDAQ: BOFL) (now known as Bank of Florida) priced 900,000 shares at $10 each and closed its opening day at $10.19 per share, UP 1.86 percent from its initial offering price. On Dec. 31, 2003, Bancshares of Florida closed at $14.74, UP 44.7 percent from its initial offering price. In 2003, the Nasdaq Composite Index gained 50 percent.
 
But don’t look askance at Bank of Florida’s IPO buyers because their investment lagged the Nasdaq after the company went public back in 2003. On Dec. 29, 2006, the stock closed at $20.49, UP 104.9 percent from its initial offering price. In comparison, the Nasdaq was up 20.6 percent.
 
 
By year end, the six curtain-raisers priced since the start of 2003 had an average aftermarket gain of 35 percent.
 
The week of Jan. 12
This week looks like it will be slow due to the national holiday to observe the birthday of the late Dr. Martin Luther King Jr. The securities markets were closed on Monday.
 
There are two deals on the calendar, MV Oil Trust (NYSE: MVO proposed), an independent oil and gas partnership, and Oculus Innovative Sciences (NASDAQ: OCLS proposed), a medical device manufacturer.
 
These two deals are aiming to raise about $180 million.
 
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