Seven of the last 100 IPOs priced since May 17 closed six months later — Friday, Nov. 17 — with aftermarket gains of over 100 percent from their initial offering prices.
And the six-month scorecard itself reported 71 winners, 28 losers and one unchanged. The average gain was 27.1 percent. That’s almost two-and-a-half times better than the underlying stock market.
The Nasdaq Composite Index closed Friday, Nov. 17, at 2,445.86, up 11.4 percent from 2,195.80 on May 17.
The big winners since May 17 were:
- Riverbed Technology (Nasdaq: RVBD) – Up 200.5 percent
- MasterCard (NYSE: MA) – Up 143.1 percent
- New Oriental Education & Technology Group (NYSE: EDU) – Up 125.8 percent
- NYMEX Holdings – Up 125.4 percent
- Volcano (Nasdaq: VOLC) – Up 123 percent
- Homes Inns & Hotel Management (Nasdaq: HMIN) – Up 123 percent
- Techwell (TWLL) – Up 108.8 percent
The spark behind the IPO market’s performance is no secret. It’s the Nasdaq Composite Index. Until this week, the last time the Nasdaq had closed above the 2,400 level was five years and nine months ago. On Friday, Feb. 16, 2001, the Nasdaq closed at 2,425.38.
But the NYMEX offering was only one of nine IPOs priced last week, excluding a unit offering. Seven of the nine IPOs closed above their initial offering prices.
The average opening-day gain of last week’s nine deals reflected a red-hot IPO market. It was 46 percent.
Among the winners was the IPO that everybody loved to hate. It was the Hertz Global Holdings (NYSE: HTZ) deal.
Hertz came to market with a lot of baggage. Among the negatives were: A quick turnaround by the venture capitalists (VCs) who had bought Hertz 11 months earlier; big payoffs to the VCs who had already collected a $1 billion dividend and planned to collect another $500 million dividend from the offering; piling on billions of dollars of debt; complaints that the price range ($16 to $18 per share) was too high, etc, etc, etc.
Don’t forget this rule of the road, though. On Wall Street, everything is for sale -– at a price.
In the end, bankers found the right price for the 88.3 million shares of Hertz. The deal was priced at $15 per share. It started trading at its offering price and closed at $15.72, UP 4.8 percent from its initial offering price — a successful offering.
Overlooked in the week’s carnival atmosphere was the Securities and Exchange Commission’s filing window.
Bankers were busy feeding the IPO pipeline. Twelve companies filed plans to go public. They were looking to raise nearly $1.8 billion. That made the week of Nov. 13 the busiest filing week since the week of August 11. That was when bankers filed plans to bring 15 companies public.
There was one filing not included in the 12 IPOs from last week’s traffic. It’s worth a bookmark.
Sterlite Industries (India) Limited (NYSE: SRL proposed), India’s largest non-ferrous metals and mining company, filed to raise $2 billion in the form of American Depositary Shares (ADS).
Here’s what made it noteworthy.
Before the offering, there has been no public market for the company’s shares or ADSs in the United States. Its stock is listed in India on the National Stock Exchange of India Limited (NSE) and on the Bombay Stock Exchange Limited (BSE).
The offering price of the ADS will be determined by the prevailing market prices of its stock in India, and the ADSs will be priced no greater than 5 percent above the closing price of the shares on the NSE or the BSE and no less than 10 percent below the closing market price of the shares on the NSE or the BSE.
Some have called such deals “IPOs” while others call such issues a secondary offering. It’s your call.
This week is a short one due to the Thanksgiving Day holiday, but bankers plan to price five IPOs. They are expected to raise about $2.2 billion.
Last week’s IPO traffic, its calendar and its pipeline were telling investors that the IPO market is shaping up for a good end-of-the year run.
Let the fireworks begin.