Interestingly enough, this is another similarity between the dog days of 2008 and the dog days of 1998: Size matters.
To refresh your memory: In 1998, the Nasdaq Composite Index topped out on July 20 and fell 29.5 percent by October 8. The IPO calendar was turning out about 44 deals per month through July, according to the U.S. Securities and Exchange Commission filings. September produced three deals, but one was the moonshot eBay (Nadsaq: EBAY). It exploded for an opening-day gain of 163.1 percent.
Bring on the Billion-Dollar Babies
Then a strange thing started happening. Billion-dollar blockbusters rolled off the IPO calendar.
Before 1998, there is no record of a billion-dollar IPO. On June 22, 1998, Alston (EUREX: AOMF.EX), a French conglomerate, was the first to come to market. Alston offered 109.1 million American Depositary Shares (ADS) at US$34.22 each to raise US$3.73 billion. The IPO traded on the New York Stock Exchange until June 2007 and now is traded on the Eurex, formerly known as the Paris Stock Exchange.
September 1998 belonged to eBay.
October 1998 belonged to a blockbuster. Bankers priced five IPOs that month and one was a billion-dollar baby.
On Oct. 22, 1998, Conoco offered 191.5 million shares at $23 each to raise $4.4 billion. In November 2002, Conoco merged with Phillips in an exchange of stock to form ConocoPhillips (NYSE: COP). Each share of Conoco received 0.4677 shares of ConocoPhillips. On June 5, 2005, ConocoPhillips split two for one and closed on Friday, April 11, 2008, at $78.59, UP 219.6 percent from Conoco’s initial offering price.
November 1998 saw a turn in the IPO market. Bankers got 19 deals priced, including another blockbuster and two dot-com moonshots.
On Nov. 11, 1998, Fox Entertainment offered 124.8 million shares at $22.50 each to raise $2.8 billion. In March 2005, News Corp. (NYSE: NWS) acquired Fox in an exchange of stock. Each share of Fox received 2.04 shares of News Corp. On Friday, April 11, 2008, News Corp. closed at $19, UP 72.3 percent from Fox Entertainment’s initial offering price.
The dot-com moonshots were EarthWeb, which scored an opening-day gain of 247.7 percent, and theglobe.com (OTCBB: TGLO), which scored an opening-day gain of 605.6 percent.
In May 2001, EarthWeb changed its name to Dice and, in July 2003, it was suspended from trading.
theglobe.com split two for one in May 1999 and closed on Friday, April 11, 2008, at 1.9 cents per share.
Turn on the Faucet
This brings us back to the present and the similarities between the two IPO markets.
This year’s first quarter belonged to the blockbuster Visa. Next week, bankers have three deals on the calendar -– the first IPO traffic of the second quarter -– and one’s a blockbuster.
American Water Works plans to offer 64 million shares at $24 to $26 each to raise $1.6 billion. Joining it is another larger offering.
Intrepid Potash (NYSE: IPI proposed), a Denver-based potash producer, plans to price 24 million shares at $25 to $26 each to raise $600 million.
This could be worth watching. Its publicly traded competitors have been on fire lately, but more on this next week.
The 1998 IPO recovery was fueled by a few blockbuster deals with well-known names. Time will tell if a 2008 IPO recovery will be led by a few blockbuster deals with household names.