The IPO Buzz: Icy Road Conditions for IPOs

Nevertheless, the stock market indexes were still up anywhere from 54 percent to 72 percent from their 2009 lows. And the 2010 IPO market may not be all that bad when you consider the facts.
 
The new-issues curtain was raised on the evening of Jan. 21 when bankers priced three deals. Collectively, those three set the pattern of what’s been happening this year.
 
The trend has been to (1) reduce the final pricing terms; (2) include insider selling, and (3) dig up retreads that couldn’t make it out the door in the past. This strategy has not worked.
 
Now let’s flip back to the evening of Jan. 21 and see what really happened.
 
Cut Price, Insiders Sell
Cellu Tissue Holdings (NYSE: CLU), an Alpharetta, Georgia-based tissue paper producer, offered 8.3 million shares at $13 each to raise $107.9 million. The deal was not as originally filed.
 
On Jan. 7, 2010, the company had set proposed offering terms to price 7.8 million shares at $15 to $17 each to raise $124.8 million. Insiders would be offering, and did wind up selling 5.6 million shares.
 
The IPO opened at $12.30, DOWN from its offering price of $13, and closed its opening day at $11.90. On Friday, Feb. 12, it closed at $11.06, DOWN 14.9 percent from its initial offering price.
 
(Note: Cellu Tissue has been the poorest aftermarket performer of this year’s IPO crop. See: IPOScoop.com’s2010 Pricings”)
 
Retread with Reduced Price
Chesapeake Lodging Trust (NYSE: CHSP), a Fairfield, New Jersey-based real estate investment trust, or REIT, offered 7.5 million shares at $20 each to raise $150 million. The deal was not carried out as originally filed.
 
On Nov. 11, 2009, the company set proposed offering terms to price 12.5 million shares at $20 each to raise $250 million. The deal was placed on the calendar for the week of Dec. 7. It did not make it out the door and was postponed.
 
Fast forward to Jan. 19, 2010, when the company refilled to offer 7.5 million shares, down from 12.5 million shares.
 
The IPO opened at $19.25, DOWN from its offering price of $20, and closed its opening day at $19. On Friday, Feb. 12, it closed at $19.27, DOWN 3.75 percent from its initial offering price.
 
Retread with Insiders Selling
Symetra Financial (NYSE: SYA), a Bellevue, Washington-based provider of group health, retirement, life insurance and other employee benefits plans, offered 30.4 million shares at $12 each to raise $364.8 million. The deal was not executed as originally filed.
 
On Oct. 29, 2007, Symetra set proposed offering terms to price 39.5 million shares at $18 to $20 each to raise $750.5 million. The deal was one of 21 IPOs on the calendar for the week of Nov. 12, 2007. Symetra was postponed; it was withdrawn almost a year later on Oct. 10, 2008.
 
Note: Insiders were trying to sell all the 39.5 million shares being offered.
 
On Oct. 5, 2009, Symetra Financial came back to market with another filing. This time it would offer 27 million shares at $12 to $14 each to raise $351 million.
 
Note: This time around, insiders scaled back their selling to 9.7 million shares.
 
The IPO opened at $12.70, UP from its offering price of $12, and closed its opening day at $12.75. On Friday, Feb. 12 it closed at $12.75, UP 6.25 percent from its initial offering price.
 
To date, a total of 13 IPOs have been priced this year, according to the U.S. Securities and Exchange Commission filings. None have created any sparkle. There were three REITS as well as three Chinese IPOs, and the final pricing terms for all 13 were reduced from their original filings.
 
As a result, their opening-day scorecard was poor – five closed as winners, seven as losers, one unchanged and the average opening-day return was a minus 1.32 percent.
 
But this doesn’t mean 2010’s IPO market is finished. It’s not yet begun.
 
Priming the Pump
The IPO pipeline lists about 90 companies looking to raise $19 billion. Nearly half a dozen have a 3-Star SCOOP rating based upon input from investment professionals. (Paid subscribers see: SCOOP Ratings.)
 
Here’s all that’s needed for the IPO market to perk up:
When pipeline companies start reporting solid results for the year 2009 and the stock market is stable again, the sexy IPOs will start moving onto the calendar.
 
 
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations and opinions.