The IPO Buzz: Reading the Dow

On Friday, April 3, the three major U.S. stock market indexes had each recovered more than 20 percent from their closing lows set on March 9 –- putting them back in “bull market” territory, according to Wall Street’s classic definition.
And there’s more. Dow theorists may have gotten their confirmation, too.
The Dow Theory has been around about 100 years and was once used as the guiding light to signal a “bull” or a “bear” market. Basically, a Dow theorist believes when two of the three Dow Jones averages (industrial, transportation and utility) hit a new high or low, it is giving a double confirmation of a turn in the market.
On Friday, the Dow Jones Industrial Average finished UP 22.5 percent from its March 9 close and the Dow Jones Transportation Average was UP 38.7 percent. The Dow Jones Utility Average was a laggard — UP 16 percent over the same time span. But all you need is two of the three averages for the Dow confirmation to come into play.
In the meantime, the IPO market looked as lonely as geeks on prom night. Bankers priced only two deals during the first quarter, filed plans for five new offerings and withdrew 17 others, according to the U.S. Securities and Exchange Commission’s filings.
Chinese Fireworks and New Filings
But it bears repeating: By the end of April’s first week, there was hope for a turnaround.
On Wednesday, April 1, two companies announced proposed pricing terms for their pending IPOs. They were Bridgepoint Education (NYSE: BPI – proposed) and Rosetta Stone (NYSE: RST – proposed). Some fireworks came on the very next day.
The year’s third IPO, (NASDAQ: CYOU), a Chinese online game provider, was priced after the closing bell on April 1, which also happened to be April Fool’s Day. But instead of a prank, Wall Street got a treat. This deal wildly outperformed anyone’s expectations. Changyou’s stock popped for an opening-day gain of 25.1 percent when it started trading on Thursday, April 2.
The clue to the future is the SEC’s filing window for the S-1 (new additions) and S-1/A (amendments) filings. (Paid subscribers to will be updated by email.)
Let’s step back to last Wednesday’s filings.
After posting proposed pricing terms, both the Bridgepoint Education and the Rosetta Stone deals jumped on the IPO calendar to be priced during the week of April 13.
Each company has mouthwatering financials. Even so, the various IPO rating services have forecast their respective aftermarket performances in a wide range, but more on this next week. subscribers will be notified, by e-mails, as to any changes in the proposed pricing terms and updated SCOOP ratings. For current SCOOP rating, please log in.