IPOScoop.com subscribers can check out what’s “hot” and what’s not by logging in and then clicking through on “SCOOP Ratings” – a new addition to the Web site. (Look on the left-hand side of the page under “IPO Pipeline.”)
Once there, you’ll see the “SCOOP Ratings” column is arranged by stars (see top bar “SCOOP Rating Definition” for details). The ratings are in descending order beginning with the hottest — a 5-Star SCOOP rating -– a potential opening-day double. But don’t get excited. There aren’t any 5-Star SCOOP-rated IPOs these days. The highest in today’s pipeline are a 3-Star rating, which means the IPO handicappers are looking for an opening-day pop of $1 to $3 per share.
Recipe for a Comeback
Worth noting: There’s more to today’s IPO market and a potential comeback from the doldrums than a dozen or more “hot issues.”
First, the IPO market is driven by the underlying stock market. That’s always been true. A quick glance at where the major U.S. stock indexes closed on Friday, May 30, 2008, will tell you all you need to know.
- The Dow Jones Industrial Average closed at 12,638.32, DOWN 4.72 percent from 13,264.82, its close on Dec. 31, 2007.
- The Nasdaq Composite Index closed at 2,522.66, DOWN 4.89 percent from 2,652.28, its close on Dec. 31.
- The S&P 500 closed at 1,400.66, DOWN 4.63 percent from 1,468.36, its close on Dec. 31.
Next, there are many fingers pointing to various worries that caused this year’s downdraft -– the collapse of the subprime market and the resulting fallout, the word “recession” surfacing, oil soaring to over $130 per barrel, politics -– no declared presidential standard bearer from the Democrats -– to mention a few.
Not surprisingly, the IPO production line dried up.
By the end of May 2008, bankers had priced a total of 23 deals, according to U.S. Securities and Exchange Commission filings. This figure excludes 13 unit offerings, of which 12 were SPACs or “blank check” deals.
These figures were well below last year’s pace.
By May 31, 2007, bankers had priced 83 deals, excluding 30 unit offerings.
In other words, by the end of May 2008, this year’s IPO traffic, excluding units, was down 72.3 percent from a year ago. If you toss in the unit offerings, then the traffic was off 68.1 percent.
The major stock indexes saw their lows on March 10, 2008 -– 11 weeks ago.
- The Dow Jones Industrial Average ended on Friday at 12,638.32, UP 7.65 percent from 11,740.16, its closing low on March 10.
- The Nasdaq Composite Index closed at 2,522.66, UP 16.3 percent from 2,169.34, its closing low on March 10.
- The S&P 500 closed at 1,400.66, UP 9.97 percent from 1,273.37, its closing low on March 10.
Aside from the stock market’s weakness, there was another problem in pricing IPOs. Bankers turned their capital-raising talents to a bailout operation — for themselves and the commercial banks to bolster their sagging balance sheets. What they did was to siphon billions from investors’ pockets that might have otherwise gone for the IPOs we all love.
Nevertheless, death, taxes and stock market cycles are inevitable. Today’s stock market could very well be at the bottom of another one of its cycles. If so, that’s good news for IPOs. And the pipeline is loaded with 3-Star SCOOP-rated deals. Stay tuned.