The IPO Buzz: History – A Crash Course

A Disastrous Week
On Friday, Oct. 10, 2008, the Dow Jones Industrial Average (DJIA) closed at 8,451.19 — DOWN 22 percent from its close at 10,831.07 on Oct. 1. Today’s stock market “crash” has been an avalanche spanning more than a week — not a mind- boggling one-day horror show.
The causes of the meltdown have been splashed across all newspapers’ front pages, so there’s no point in regurgitating them.
But by Friday’s close, the bottom line was this: On Oct. 9, 2007, (a year ago) the DJIA ended at 14,164.53, its all- time closing high. Over the last 366 days, the Dow had fallen 40.3 percent. Friday’s close was the lowest since April 25, 2003, when the Dow finished at 8,306.35.
Back to 1987
On Monday, Oct. 19, 1987, the DJIA closed at 1,738.41, DOWN 508.32 points, or 22.6 percent (a record single-day percentage decline) from its previous close of 2,246.73.
But that crash was not a one-day affair. The sell-off started on Wednesday, Oct. 14, 1987. The DJIA had closed on the previous day at 2,508.16 and the four-day fall amounted to a 30.6 percent decline. 
Here’s what happened, simply put: Before the opening on Wednesday, Oct. 14, the trade deficit was announced, reportedly $1.5 billion larger than expected. At the time, the deficit was exceeding a $100 billion a year. The shocking news sparked selling of U.S. Treasuries – fear of a weakening dollar – and it spilled into the stock market. On that Wednesday, the Dow lost a then-record 95.46 points in a single day.
Thursday, Oct. 15, 1987, was more of the same as the DJIA lost another 57.61 points. Then came Friday, Oct. 16, 1987, and the Dow lost 108.36 points — the first time the Dow had lost over 100 points in a single day.
Next came Monday, Oct. 19, which went into the history books as “Black Monday.”
Actually, from peak to trough 1987’s crash wasn’t all that bad. From the DJIA’s closing high on Aug. 25 of 2,722.42 to 1,738.41, its closing low on Oct. 19, it was a loss of 36.2 percent. The decline took 55 days.
Over the next six weeks, the markets were somewhat unsettled as the DJIA traded between a high of 2,027.85 (Oct. 21) and a low of 1,776.53 (Dec. 3) before closing 1987 at 1,938.83.
Back in 1987, the IPO market had been very active. From January through October, the calendar had been averaging 54 IPOs per month, according to the U.S. Securities and Exchange Commission filings. The IPO traffic slowed in November and December, but bankers were still able to price 16 deals in those two months to raise the year’s total to 556 IPOs.
The Crash of 1929
This stock market crash is remembered as happening on Oct. 29, 1929. However, it was a three-day affair.
On Oct. 24, 1929, which became known as “Black Thursday,” the DJIA closed at 299.47, DOWN 6.38 points or 2.1 percent from its previous session. The New York Stock Exchange’s volume on “Black Thursday” soared to a then-record 12.9 million shares. That was more than three times an average daily volume of about 4 million shares.
On Oct. 28, 1929, the DJIA closed at 260.64, DOWN 38.33 points or 12.8 percent from its previous session.
On Oct. 29, 1929, which became known as “Black Tuesday,” the DJIA closed at 230.07, DOWN 30.57 points or 11.7 percent from its previous session.
Overall, the DJIA lost 23 percent over those two days.
And that was the good news.
Now the bad news: From peak to trough, it took 1,038 days and the DJIA posted a loss of 89.2 percent. On Sept. 3, 1929, the Dow closed at its then-high of 381.17. On July 8, 1932, the Dow closed at 41.22.
Heads Above Water
Nevertheless, as battered and beaten as today’s Wall Street investment bankers might be, they plan to launch an IPO this week.
CapitalSource Healthcare REIT (NYSE: CHR proposed) (Quote, news and charts) is a Westlake Village, California-based real estate investment trust formed to invest in health-care-related real estate assets, principally skilled nursing facilities.
Bankers are looking to price 14 million shares at $18 to $21 on Wednesday evening, Oct. 15, to trade on Thursday morning.
Note: Right after the stock market crashed on “Black Monday,” on Oct. 19, 1987, there was a sharp two-day rally. The DJIA gained 102.27 points on Tuesday -– the first time it scored a 100-point day gain -– and on Wednesday, it jumped another 186 points for a two-day gain of 16.6 percent.
Who knows? History might repeat itself.