The IPO Buzz: Down to Zero

As November ended, all the popular U.S. stock market indexes were down sharply for the year with losses ranging anywhere from 33 percent to 42 percent. (More on this later.)
The December IPO calendars from 1970 through 2007 produced 1,148 deals, according to U.S. Securities and Exchange Commission filings. That was an average of 30.2 IPOs per December. Not bad when you consider that the average month’s production in that 38-year span was 27.4 IPOs. And, traditionally, the IPO market closed down by mid-December.
The busiest December was in 1983, with 99 IPOs. The slowest was zero in December of 1973, 1974 and 1975.
A Lonely Number
One may be the loneliest number, especially if you’re a Three Dog Night fan. But on Wall Street, you just can’t get any lonelier than zero.
A zero month seems to be in vogue for 2008’s IPO market. Nothing was priced in September. Ditto for October. One deal was priced in November. The calendar looks clean and green for December. But that doesn’t mean bankers were not trying.
Since the Labor Day break, five deals have appeared on the IPO calendar at one time or another with pricing dates. Only one made it out the door. Those were:
For the week of September 15
  • Consonus Technologies (Nasdaq: DCTI proposed), a North Carolina-based provider of IT infrastructure services and solutions, planned to price 3 million shares at $8 to $10 each. The deal was listed as “day to day” and withdrawn on Sept. 16, 2008.
  • Fluidigm (FLDM proposed), a South San Francisco-based provider of laboratory analytical instruments, planned to price 5.3 million shares at $14 to $16 each. The deal was to be priced Thursday evening for Friday’s trading. It was pushed into the following week and withdrawn on Sept. 22, 2008.
For the week of September 29
  • Safety-Kleen (NYSE: SK proposed) a Texas-based provider of used oil re-refining and recycling and parts cleaning services, planned to price 21.9 million shares at $15 to $17 each. The deal was listed as the “week of” and then was postponed on Oct. 2.
For the week of October 13
  • CapitalSource Healthcare REIT (NYSE: CHR proposed), a newly formed California-based real estate investment trust, planned to price 14 million shares at $18 to $21 each. The deal was to be priced Wednesday evening for Thursday’s trading. It was postponed on Oct. 15.
Out the Door
For the week of November 17
  • Grand Canyon Education (Nasdaq: LOPE), (Quote, chart, news) a Phoenix-based provider of online post-secondary education services, priced 10.5 million shares at $12 each. That was 40 percent below the high end of its original price range of $18 to $20 per share. The IPO started trading Thursday morning, Nov. 20, at $10, DOWN $2 per share, or 16.7 percent from its initial offering price.
There were unconfirmed rumors that the bankers had a book at $10 to $12 per share. And given what happened, it may very well have been true.
Nevertheless, this brings to mind an old Wall Street cliché (from the 1970s era) when something like this happened. In pricing the deal at $12 per share and opening it at $10, the “old time” syndicate people would have said they were cleaning out the flippers and then bringing the deal back. Sometimes it worked, sometimes it did not.
Last week’s powerful rally did not salvage November, but it sure trimmed the losses for the month and the year. Consider the following:
  • The Dow Jones Industrial Average gained 9.7 percent for the week, but lost 5.32 percent for November. For the year to date, it was still DOWN 33.4 percent.
  • The Nasdaq Composite Index gained 10.9 percent for the week, but lost 10.8 percent for November. For the year to date, it was still DOWN 42.1 percent.
  • The S&P 500 Index gained 12 percent for the week, but lost 7.48 percent for November. For the year to date, it was still DOWN 39 percent.
This brings to mind another Wall Street cliché: Maybe today’s stock market is setting the stage for a year-end rally.
If that’s true, perhaps Santa will don a crash helmet before flying over Wall Street.