The IPO Buzz: Sexy Secondaries

January 2009’s numbers were much better than the same period a year ago. The 14 secondary offerings raised $3 billion, according to U.S. Securities and Exchange Commission filings. In January 2008, nine secondary offerings were priced. They raised $2 billion.
Wind in the Face
The last two Januaries proved to be brutal as the major stock market indexes took significant hits. Consider the following:
  • On Jan. 30, 2009, the Dow Jones Industrial Average closed at 8,000.86, DOWN 8.84 percent from its Dec. 31, 2008, close. The Nasdaq Composite Index closed at 1,476.42, DOWN 6.38 percent from its 2008 close and the S&P 500 closed at 825.88, DOWN 8.57 percent from its year-end close.
  • On Jan. 31, 2008, the Dow Jones Industrial Average closed at 12,650.36, DOWN 4.63 percent from its Dec. 31, 2007, close. The Nasdaq Composite Index closed at 2,389.86, DOWN 9.89 percent, and the S&P 500 closed at 1,378.55, DOWN 6.12 percent, from their year-end 2007 closing levels.
January 2009 Redux
With the market’s sell-off, it might be surprising that January’s final week was the busiest for secondary deals. Bankers priced six of the month’s 14 secondary offerings and raised $1.76 billion of the $3 billion as the month wrapped up.
The largest deal was the Jan. 28 offering of Newmont Mining (NYSE: NEM), the Denver-based gold producer. On Wednesday evening, the company priced 30 million shares at $37 each, which raised $1.1 billion. The secondary deal was priced below its close of $38.61. That move helped. The stock opened on Thursday morning at $37.40 and sold at a session high of $40.50 on Friday.
Note: Pricing a secondary offering in “the hole” (below its previous close) seems to be working these days. As an example, all 14 of this year’s secondary offerings have been priced below their most recent close, and all traded at premiums. However, one must remember Wall Street’s “cover yourself” caveat: “Past performance does not guarantee future performance.”
But unlike an IPO with its forward calendar, there isn’t one for secondary offerings. In practice, they are somewhat like block trades. A deal gets filed one day, priced the next and trades the following morning. The Friday afternoon secondary calendar for the coming week won’t show much. Let’s take a look at last week.
On Friday afternoon, Jan. 23, the secondary calendar for the week of Jan. 26 listed one deal – Whiting Petroleum (NYSE: WLL) and that was a carryover from the previous week. Fast forward to Friday, Jan. 30: The secondary calendar generated six deals, and this week, Feb. 2,  only one – Velocity Portfolio Group (NYSE: PGV) – appeared.
And this brings us to the Land of IPOs.
Hot Meals and Headlines
There is nothing on tap for the week of Feb. 2, but there was some news from last week. (See IPOScoop.comIPOs just filed.)
Mead Johnson Nutrition (NYSE: MJN proposed), an Evansville, Indiana-based pediatric nutrition company, posted its proposed offering terms of 25 million shares at $21 to $24 each and set a pricing target of Tuesday evening, Feb. 10, to trade on Wednesday morning, Feb. 11.
OpenTable (Nasdaq: tba), a San Francisco-based online company that lets users make restaurant reservations, filed for an IPO to raise $40 million. The lead manager is Merrill Lynch.
Some eyebrows were raised about the bulge bracket banker Merrill Lynch allegedly lowering its standards to underwrite a $40 million deal. That’s not accurate.
Let’s flip back to last year, 2008, and review a couple of Merrill Lynch’s deals.
  • On Jan. 18, 2008, Merrill was the lead manager for ATA (Nasdaq: ATAI), a Beijing-based provider of computer-based testing services, which offered 4.79 million shares at $9.50 each to raise $46.3 million.
  • On Aug. 4, Merrill was the lead manager for China Mass Media International Advertising (NYSE: CMM), a Beijing-based independent television advertising company, which offered 7.2 million shares at $6.80 each to raise $49 million.
Of course, filing for a stated dollar amount can be far different from setting an IPO’s proposed pricing terms a few months later. Mead Johnson is a recent example.
On Sept. 15, 2008, Mead Johnson filed for an IPO to raise $1 billion. On Jan. 28, 2009, the company set proposed pricing terms (25 million shares at $21 to $24 each) to raise $562 million. will dig a little deeper into Mead Johnson next week. We’ll bet many people did not know that MJ was a wild trading stock on the American Stock Exchange in the early 1960s.