The IPO Buzz: IPO Stars Align

  • First, the two IPOs priced last week were solid winners, a needed ingredient for continued success.
  • Second, the underlying stock market has staged a remarkable recovery from its March 9 closing lows.
  • Finally, the year’s first quarter ended three weeks ago and “earnings season” is kicking in.
The IPOs
Bridgepoint Education (NYSE: BPI) was priced in the hole – 30 percent below its filing range. On Tuesday evening, bankers offered 13.5 million shares at $10.50 each, down from $14 to $16 per share. The IPO opened unchanged at $10.50 on Wednesday morning, sank to $9.75 before recovering to close its opening day at $11.10. It closed Friday at $12.01, UP 14.4 percent from its offering price.
Bridgepoint has great financials, but its industry sector has been weak and underperforming the underlying stock market. (Check Google financial subcategory School)
Rosetta Stone (NYSE: RST) was priced above its filing range. On Wednesday evening, bankers offered 6.25 million shares at $18 each, up from $15 to $17 per share. The IPO opened at $25 on Thursday morning and didn’t look back. It traded up to $29.39 in Friday’s market before closing the week at $28.25, UP 56.9 percent from its offering price.
Rosetta Stone has great financials and its industry sector has been strong. (Check Google financial subcategory Software & Programming)
(Note: Some have confused the two companies stating they compete in the same industry. Not so. Bridgepoint is in education awarding degrees and diplomas. Rosetta sells computer software programs to help people learn other languages.)
The Stock Market
Here are two things that bode well for the return of IPOs – a strong stock market recovery and the length of time of that recovery.
The Nasdaq Composite Index, the barometer of the IPO market, closed Friday, April 17, 2009, at 1,673.07, UP 31.9 percent from 1,268.64, its March 9 closing low – six weeks ago. The “six weeks ago” is important.
In past worlds, it usually took the IPO market about six weeks to stage a comeback after a stock market sell-off. Naturally, the resurgence of IPOs depends upon the severity of the stock market’s decline and the length of time from peak to trough.
Earnings Season
At this time of year – April – it’s not unusual for the Securities and Exchange Commission IPO filing window to be the loneliest place in town. This year is no exception.
The last new filing (S/1) for an IPO was on March 17 when (NASDAQ: CYOU) announced plans to go public. In addition, there have been virtually no updated amendments (S/1-As) for any of the deals already in the pipeline.
There is an answer for this blackout.
It’s “earnings season.”
And you better believe bankers have been telling their corporate clients to hold off trying to go public now and to get their first-quarter numbers out. Once done, it’ll be off to the IPO races.
You can start looking for a pickup in the filing traffic beginning in about a week or two, and then the IPO calendar will start filling up in May.
Wing Flapping – No Flying
The big, big news emerging from last week’s IPO market was the story that eBay (NASDAQ: EBAY) will be putting Skype, its wholly owned subsidiary, up for sale as an IPO sometime in 2010.
That’s nice to know.
But don’t get too excited. You’ll have to wait for Skype to file its S/1 papers. The best that can be said about this pending offering is that the Skype name is being readied to move into IPO dreamland. That’s when the deal gets filed.
Reality is when an IPO hits the new-issues calendar.