The IPO calendar is clean and green for the foreseeable future. But history is on the side of the new-issues market.
Here’s where we stood on March 19, the day Visa (NYSE: V) made its debut:
- Bankers had priced 12 IPOs so far in 2008, according to U.S. Securities and Exchange Commission filings. That was the slowest annual start since 2003 when five deals were priced during its first 12 weeks.
- The Nasdaq Composite Index, the barometer of the IPO market, was in bear market territory. On March 10, the Nasdaq Composite closed at 2,169.34, DOWN 24.1 percent from 2,859.12, its previous closing high on Oct. 31, 2007. On Friday, March 20, it stood at 2,258.11, DOWN 21 percent from Oct. 31.
- That pullback dried up the IPO calendar.
- This year’s average IPO traffic has shrunk to one deal a week. That’s a sharp reduction from 2007 when the IPO production line averaged nearly 17 deals a month.
Back to the future
But let’s back up 10 years ago when the Nasdaq Composite plunged into another bear market. On Oct. 8, 1998, the Nasdaq Composite closed at 1,419.12, DOWN 29.5 percent from 2,014.25, its then-record closing high on July 20, 1998.
That drop reined in the IPO calendar as well. In 1998, the average monthly IPO traffic through July had been 44 deals. By September, the bear market had bitten deeply into the issuance of new stock, much like the present. Only three IPOs got out the door in September 1998. But one of those deals set the groundwork for the future. Anybody ever hear of eBay (Nasdaq: EBAY)?
On Sept. 24, 1998, eBay offered 3.5 million shares at $18 each. The stock opened at $53.50, sold as high as $54.25 and closed its opening day at $47.38, UP 163.2 percent from its initial offering price. Fast forward to Friday, March 20, 2008, when eBay closed at $28.60, UP 3,713.3 percent from 75 cents per share (adjusted for stock splits) from its offering price.
Ten years ago, the IPO engine didn’t get cranking until November 1998, or about five weeks after the Nasdaq Composite hit its low. Bankers were able to get 19 deals out the door that month and another 21 in an abbreviated December. Due to seasonal factors, the December IPO window is open for about two weeks.
That brings us up to the present and life after Visa.
Some stock market gurus have been saying the stock market has reached its bottom. Hopefully, they are right. Naturally, we won’t know for awhile. Nevertheless, the IPO pipeline is primed for action.
At press time, there were 193 IPOs waiting in the wings to go public. They expect to raise $38.2 billion. And believe it or not, that’s an improvement since the beginning of the year.
On Dec. 31, 2007, there were 176 IPOs in the pipeline. They expected to raise $45.9 billion; of course, $10 billion of that was from the then-pending Visa IPO.
And that’s not all, folks!
Some of the 193 IPOs in the pipeline you might want to bookmark. But more on these later. Stay tuned.