The IPO Buzz: Grading on the Curve

On Dec. 8, 2008, the IPO Scorecard showed three deals closed above their initial offering prices and 29 below. The average loss was 31.9 percent for the year’s 32 IPOs.
That’s an “F” on most report cards.
Pay Attention, Class
Now look at the rest of the class: All three of the popular U.S. stock indexes have done far worse than the IPO market since the beginning of the year.
Let’s start with the granddaddy of them all. The Dow Jones Industrial Average closed on Friday at 8,637.09, DOWN 34.9 percent from 13,264.82, its close on Dec. 31, 2007. Its scorecard showed two winners and 28 losers.
The Dow’s two winners were McDonald’s (NYSE: MCD) and Wal-Mart Stores (NYSE: WMT) –- one is the fast-food restaurant chain with modest prices and the other is the world’s largest discount retailer.
  • McDonald’s ended on Friday at $62.72, UP 6.5 percent from $58.91, its Dec. 31 close.
  • Wal-Mart Stores finished Friday at $58.21, UP 18.4 percent from $47.53, its Dec. 31 close.
Let’s take a look at the Nasdaq Composite Index. It ended on Friday at 1,509.31, DOWN 43.1 percent from 2,652.28, its close on Dec. 31. There are 2,964 stocks in the Nasdaq Composite and no easily available services to sort out winners from losers.
The list begins with 012 Smile.Communications (Nasdaq: SMLC), an Israeli communication services provider, and ends with ZymoGenetics (Nasdaq: ZGEN), a Seattle-based discovery company focusing on therapeutic proteins.
  • 012 Smile.Communications closed on Friday at $4.70, DOWN 63.7 percent from $12.96, its Dec. 31 close.
  • ZymoGenetics finished Friday at $2.54, DOWN 78.2 percent from $11.67, its Dec. 31 close.
Power of the Press
And then there is the S&P 500 Index. It ended on Friday at 876.07, DOWN 40.3 percent from 1,468.36, its close on Dec. 31. Once again, there are no easily available services to sort out the S&P 500’s winners from losers.
On Friday, Dec. 5, the highest-priced stock in the S&P 500 was The Washington Post (Nasdaq: WPO), the Washington, D.C.-based newspaper publisher and education company, and the lowest-priced stock was E*Trade Financial (Nasdaq: ETFC), the New York City-based financial services firm.
  • The Washington Post’s stock closed on Friday at $402.32, DOWN 49.2 percent from $791.43, its Dec. 31 close.
  • E*Trade Financial ended on Friday at $1.27, DOWN 64.2 percent from $3.55, its Dec. 31 close.
It’s All Relative
The Web site posts a Stock Performance vs. Index Performance comparison for a three-month period, a one-month period and a one-day period. The major U.S. stock indexes’ performances for the three-month period from Sept. 5, 2008, through Dec. 4, 2008, show the following:
  • S&P 500 Index: 8 stocks up and 492 down.
  • Nasdaq 100 Index: 2 stocks up and 98 down.
  • Dow Jones Industrial Average: 2 stocks up and 28 down.
In view of the above, maybe the 2008 IPO Scorecard’s average loss of 31.9 percent with three winners doesn’t look all that bad when the professor grades on the curve.
Maybe a “C-minus?”
In my college days, some called that “a gentleman’s C.”