For bankers and IPO investors, that philosophy applies when looking at the IPO calendar. Realistically speaking, the life span of an IPO calendar is three weeks – last week, this week and next. Anything after next week is purely speculation and bankers shy away from setting a pricing date beyond then. After all, nobody can predict what the market will be doing three weeks into the future, and to put a deal on the calendar that far out might result in having to pull it “due to market conditions.” That labels the IPO as damaged goods.
The current IPO calendar is an example. Take a look at last week (Oct. 12), this week (Oct. 19, which is infamous in Wall Street lore as the anniversary of the 1987 stock market crash) and next week (Oct. 26). You are free to look for the week of Nov. 2, but there isn’t anything on it.
Last week, bankers priced two deals that raised $546 million.
This week’s calendar consists of three deals looking to raise $800 million.
Next week, the week of Oct. 26, the calendar has another three IPOs, with bankers aiming to raise $950 million.
Just because the week of Nov. 2 is “clean and green” for now, this doesn’t mean the IPO calendar has closed down. It hasn’t, but more on that later.
IPOs in the Rear View Mirror
Last week, bankers priced two deals – RailAmerica (NYSE: RA) and China Real Estate Information (NASDAQ: CRIC).
RailAmerica, the Jacksonville, Florida-based short-line railroad operator, priced 22 million shares at $15 each to raise $330 million. That was below the 21 million shares at $16 to $18 each that it planned to raise $357 million.
Cutting a deal rarely results in a moonshot aftermarket performance, but there was more to the RailAmerica story than a price reduction.
Both the company and insiders planned to offer 10.5 million shares each. When the pricing terms were announced, it was discovered that insiders had tossed another million shares into an already weak offering. They sold 11.5 million. The IPO opened at $14.35, DOWN 65 cents from its initial offering price, and closed its opening day at $13.75; it ended the week at $14.26. It never traded at or above its offering price.
China Real Estate Information, a provider of real estate information in China, priced 18 million shares at $12 each to raise $216 million. That was near the low end of its $11.80- to $13.80-a-share filing range.
There were many conflicting stories circulating about the offering — some saying they wouldn’t touch it while others reported it was oversubscribed, but with reservations. They were looking at some recently priced deals also reported as being oversubscribed that didn’t work out, such as Shanda Games (NASDAQ: GAME), another Chinese deal. That one tanked in the aftermarket. Shanda Games priced 83.5 million shares at $12.50 each and closed its opening day at $10.75.
In short, people were spooked about Chinese deals and of deals reported as “oversubscribed.” The IPO opened at $12.28, its NASDAQ official opening price, and on target for a 1-Star SCOOP rating (flat to up 50 cents). The IPO dipped to $12.10 and then caught fire to close at $14.20, UP 18.3 percent from its initial offering price.
Through the Windshield
This week’s IPO calendar has the brand-name company Dole Foods (NASDAQ: DOLE – proposed) on it. Dole is a California-based distributor of fresh fruit and fresh vegetables. It traces its origins back to 1851. Today Dole sources, grows, processes, markets and distributes its nearly 200 products in more than 90 countries. Dole reported net income of $95 million on revenues of nearly $7.2 billion for the 12-month period ending June 30, 2009.
Dole plans to offer 35.7 million shares at $13 to $15 each to raise $500 million. The deal is expected to be priced on Thursday evening, Oct. 22, to trade Friday morning.
Also on the calendar is another Chinese deal.
ZST Digital Networks (NASDAQ: ZSTN – proposed) is a supplier of digital and optical network equipment to cable system operators in the Henan Province of China.
ZST plans to offer 3.1 million shares at $7.50 to $8.50 to raise about $25 million. The deal is expected to be priced on Monday evening, Oct. 19, to trade on Tuesday morning.
Oct. 19, of course, became known as “Black Monday” in 1987 when the Dow Jones industrial average lost 508 points, or 22.6 percent – its largest one-day percentage drop in history.
Of course, 22 years later, the Dow was hovering just below 10,000 before Monday’s opening bell. The U.S. stock market has rebounded nearly 60 percent from its lows in March, which followed the market turmoil after Lehman Brothers’ bankruptcy filing on Sept. 15, 2008.
On the IPO Horizon
Heading the IPO calendar for the week of Oct. 26 is AEI (NYSE – AEI – proposed). Based in Grand Cayman, the company operates energy infrastructure assets in 19 countries, such as Latin America, Central and Eastern Europe and Asia. Its businesses include power distribution, power generation, natural gas transportation, services and, and retail fuel. The company operates or has joint control of more than 50 businesses and has investments in more than 10 others.
AEI plans to offer 50 million shares at $14 to $16 each to raise about $750 million. The deal is expected to be priced on Wednesday evening, Oct. 28, to trade Thursday morning.
Beyond the Edge of Time
A remarkable trend has been developing in 2009’s IPO market. Compare the year’s first six months to its last three-and-a-half months, and the trend stands out. Consider the following numbers:
During 2009’s first half, 15 companies filed to go public, expecting to raise $3.5 billion, according to the U.S. Securities and Exchange Commission’s filings. By the end of June 2009, the IPO calendar had priced 14 companies. They raised $2.3 billion.
Since July 1 through mid-October, 51 companies filed to go public, looking to raise $17.5 billion. By mid-October, 25 companies had gone public. They raised $16.5 billion.
And here are a few of the recently filed IPOs that will draw the attention of the financial media:
- Dollar General (NYSE: DG – proposed) is a Goodlettsville, Tennessee-based discount retailer that operates about 8,577 stores in 35 states. On Aug. 8, 2009, the company filed for an IPO to raise $750 million.
- GAIN Capital Holdings (tba) is a Bedminster, New Jersey-based online provider of retail foreign-exchange trading and related services. On Aug. 31, the company filed for an IPO to raise $125 million.
- Rue 21 (NYSE: RUE – proposed) is a Warrendale, Pennsylvania-based specialty apparel retailer that offers the latest fashion trends to girls and guys at value prices. On Aug. 31, the company filed for an IPO to raise $125 million.
And that’s not all, folks!
On Friday, Oct. 16, four more companies filed to go public.
The IPO calendar might cover only a three-week span, but looking over the new-issue horizon, the future could be busy. Stay tuned.