The IPO Buzz: IPO Drama in 2012

The Facebook (FB) IPO turned out to be the 2012 Internet IPO bubble wrapped up in a single offering. Like most of the 1999/2000 Internet IPOs, Facebook came to town like a three-ring circus with a lot of hype, was priced above its original filing range, popped on its opening trade, then flopped and became a lawyer’s circus. The 2012 Internet circus came to town and was over by the close.
Drama Queen
Here are the details of the Facebook offering.
On Feb. 1, 2012, the company filed for an IPO to raise $5 billion. On May 3, Facebook announced proposed pricing terms to offer 337.4 million shares at $28 to $35 each. On May 16, Facebook announced new pricing terms to offer 421.2 million shares at $34 to $38 each. The next day, May 17, Facebook priced 421.2 million shares at $38 each. On May 18, the IPO opened on the NASDAQ Global Select Market (to much controversy and, later, litigation) at $42.05 per share. The stock sold as high as $45 and closed its opening day at $38.23. By May 31, the IPO sold as low as $26.44, DOWN 30.4 percent from its initial offering price.
The original Internet IPO bubble began in November 1998 and was played out by September 2000. Here’s where it started.
On Nov. 10, 1998, EarthWeb priced its IPO of 2.1 million shares at $14 each. The stock opened on Nov. 11, 1998, at $40 and closed its opening day at $48.69, UP 247.8 percent. (Note: In 2000, EarthWeb sold its content properties to, changed its name to Dice Inc. and was taken private.)
On Nov. 12, 1998, (TGLO) priced its IPO of 3.1 million shares at $9 each. The stock opened on Nov. 13 (yes – Friday the 13th) at $90 and closed its opening day at $63.69, UP 605.6 percent from its initial offering price. (That is the largest opening-day percentage gain by an IPO – ever.) Note: The stock recently traded at 0.2 cent per share on the OTC Bulletin Board.
During the Insanity-dot-com era, the IPO calendar produced 986 IPOs, according to the U.S. Securities and Exchange Commission, and 205 scored opening-day gains of 100 percent more. The first recorded opening-day moonshot (100 percent or better) came in October 1980. Over the next 18 years, until November 1998, only 32 IPOs scored opening-day moonshots.
Getting JOBS
The Jumpstart Our Business Startup Act of 2012, or JOBS Act for short, was signed into law in April 2012. It has simplified the procedure for companies going public.
Under the new system, companies can confidentially file their pre-IPO plans with the SEC, keep competitive information confidential, complete the paperwork and wait for market conditions before posting their S-1 filings. Once the postings are done, the IPOs can go on the calendar in 21 days.
Bulls, Bears and the Cliff
Stock market conditions have always influenced IPOs. Bullish markets produce IPO traffic. Bearish markets dry up the calendar. This year – 2012 – was classic.
The Nasdaq Composite Index, the barometer of the IPO market, closed on Dec. 30, 2011, at 2,605.15 and ran up to its then-2012 closing high of 3,119.70 on April 2, UP 19.7 percent from the beginning of the year.
The IPO calendar joined the party. The calendar usually carries over after a market top and this year was no different. From January through May, the calendar produced 74 IPOs out of the year’s total of 132 IPOs, excluding unit offerings and business development companies.
The Nasdaq Composite tumbled from its April high to a June 1 closing low of 2,747.48, DOWN 11.9 from its previous closing high.
June 2012’s IPO calendar produced only four deals.
The Nasdaq Composite turned up in June, ran up to its year’s high of 3,183.95 on Sept. 14, pulled back and flattened out. There were other things in October, November and December that captured people’s attention – the election and, closing out the year, concerns over the “fiscal cliff” from Washington, D.C.
From July through October, the calendar was back in play. It turned out 50 IPOs.
In conclusion, 2012 had three IPO stories – the Facebook IPO, the JOBS Act and the stock market’s influence over the IPO calendar.
Happy New Year to one and all!
Stay tuned.
Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.