The IPO Buzz: Hot or Not, An IPO Summer Sale

Nevertheless, it is somewhat unusual for the IPO market to hold an “end-of-summer” sale. The historical pattern is the calendar fades away by mid-August. That’s vacation time for many of Wall Street’s bankers.  
Now back to the present and what makes this week’s IPO surge interesting.
As of the close on Friday, July 25, a total of 21 IPOs had been priced so far this month, according to the U.S. Securities and Exchange Commission filings. This excludes two unit offerings consisting of common stock and warrants. July’s traffic is expected to be larger than 2014’s average. For the year’s first six months, 151 IPOs have been priced, or slightly over 25 per month.
When the Fish Don’t Bite
What sets July aside from 2014 is not the volume, but the lack of investor demand.
Consider this: Fifteen of July’s 21 IPOs had to be reduced in price – yes, reduced in price – to meet lackluster investor demand. Their opening-day trading performance was largely forgettable. Eight of the 15 finished their first day of trading in the winner’s circle, five were losers, and the other two were unchanged. The median gain was only 0.5 percent.  
In comparison, the other six IPOs were priced within or above their filing ranges. All turned in remarkable aftermarket performances. All six finished their opening day in the winner’s circle. Their average opening-day gain was 39.9 percent.
There is a lesson to be learned from the above. Let it be a clue as to what to expect from this week’s IPO calendar.
Compare an IPO’s final pricing terms with its most recent preliminary prospectus, or “red herring” in Wall Street jargon. If the deal is priced within or above its filing range, you can expect a pop. If it is priced below its filing range, you might not get a pop.
Safer Cars and Affordable Facelifts
Not surprisingly, the IPO players don’t think all 22 deals will get out the door. But there are a few deals they think will draw some interest, listed here in alphabetical order: HealthEquity (HQY – proposed), Mobileye (MBLY – proposed), Spark Energy (SPKE – proposed), Synchrony Financial (SYF – proposed), Transocean Partners (RIGP – proposed) and Whitelake Chemical LP (WLKP – proposed). The themes include the popular healthcare and energy sectors, of course, plus technology to help drivers avoid accidents and financing for facelifts.
HealthEquity is a Draper, Utah-based provider of technology that help consumers make healthcare saving and spending decisions. The company provides a platform where consumers can access their tax-advantaged healthcare savings, compare treatment options and pricing, evaluate and pay healthcare bills, receive personalized benefit and clinical information, earn wellness incentives and make educated investment choices to increase their tax-advantaged healthcare savings.
(For more information, please click here: HealthEquity)
Mobileye is known for its camera-based Advanced Driver Assistance Systems to improve safety by helping drivers avoid collisions. The company, whose main business is centered in Jerusalem, is working on mostly hands-free driving technology, according to its prospectus.
(For more information, please click here: Mobileye N.V.)
Spark Energy is a Houston-based retail energy services company that gives residential and commercial customers an alternative choice of where to buy their natural gas and electricity. Spark purchases its natural gas and electricity supply from a variety of wholesale providers and bills its customers monthly for the delivery of natural gas and electricity based on their consumption at either a fixed or variable price. Spark Energy serves customers from California to New York. The company plans to pay a quarterly dividend of 36.25 cents per share, at a rate of $1.45 per share on an annualized basis, to yield 7.25 percent at the mid-point of its price range.
(For more information, please click here: Spark Energy)
Synchrony Financial is a Stamford-based spinoff from G.E. Capital. The company provides a range of credit products through a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers in 329,000 locations across the United States and Canada, and their websites and mobile applications. Synchrony Financial provides private-label credit cards for retailers as diverse as Amazon, Brooks Brothers, Chevron, Dillard’s, Gap, J.C. Penney and Wal-Mart, according to its prospectus. The company is also known for CareCredit, a type of financing for facelifts and other cosmetic surgery as well as for elective healthcare procedures and veterinary care.
(For more information, please click here: Synchrony Financial)
Transocean Partners is an Aberdeen, Scotland-based company recently formed to own, operate and acquire modern technologically advanced offshore drilling rigs. The company’s initial assets consist of 51 percent interests in the RigCos that own and run three ultra-deepwater drilling rigs that are currently operating in the U.S. Gulf of Mexico. The company’s drilling rigs operate under long-term contracts with Chevron and BP, two leading international energy companies. The company plans to pay a quarterly dividend of 36.25 cents per share, at a rate of $1.45 per share on an annualized basis, to yield 7.25 percent at the mid-point of its price range.
(For more information, please click here: Transocean Partners)
Westlake Chemical Partners LP is a Houston-based limited partnership recently formed by Westlake to operate, acquire and develop ethylene production facilities and related assets. Westlake is a vertically integrated, international manufacturer and marketer of basic chemicals, polymers and fabricated building products. The company plans to pay a quarterly dividend of 27.50 cents per share, at a rate of $1.10 per share on an annualized basis, to yield 5.5 percent at the mid-point of its price range.
(For more information, please click here: Westlake Chemical Partners LP)
Looking into the week of Aug. 4, 2014, the calendar has one deal planning to raise about $203 billion. But more names could pop onto the calendar by the time next week rolls around.
Stay tuned.
Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.