The IPO Buzz: Sizzling Secondary Traffic

But first, let’s take a look at the first company to go public in June. Government Properties Income Trust priced 10 million shares at $20 each on Tuesday evening, June 2, the low end of its $20 to $22 per share filing range. The IPO opened on the New York Stock Exchange on Wednesday morning at $19.40, closed its opening day at $19.47 per share and closed on Friday at $19.60, DOWN 2 percent from its offering price.
The IPO buzz was that the deal failed to attract any significant institutional interest and was sold to retail investors. That could explain why there were no aftermarket orders for the deal and why it did not pop in the aftermarket.
All About Yield
Nevertheless, it was not a total loss.
The initial investors stand to collect an 8 percent yield, if things go according to plan. Government Properties said it intends to make quarterly distributions of 40 cents per share, or $1.60 per share annually.
In conclusion, it would appear the underwriters tossed the deal into the market and walked away from supporting it. They had other things to do. The secondary calendar has been the focus of their attention.
Since the beginning of May 2009, bankers have priced a reported 121 secondary/follow-on offerings that raised about $96 billion.
With this traffic in mind, let’s take a look at the IPO calendar dating back to 1970.
The busiest month for pricing IPOs came in October 1996 when bankers priced 109 IPOs, which raised $7.1 billion. And the largest dollar volume raised came in November 1999 when bankers raised $33.9 billion in pricing 59 IPOs.
Over the last five weeks, bankers priced 121 secondary/follow-on deals, which raised $96 billion.
The driving force behind the fast-track equities calendar has been the underlying stock market. From its March 9 closing lows to June 5, the Dow Jones Industrial Average gained 33.9 percent; the S&P 500 gained 39 percent and the Nasdaq Composite Index gained 45.8 percent. That surge opened the door for companies and financial institutions to raise much needed capital.
More on the Mortgage Front
This brings us to the present and this week’s calendar.
At press time, there were no secondary offerings on tap, but this is turning out to be normal. Last Friday, May 29, had nothing on the secondary calendar either. By week’s end, 34 deals got into the market.
And this week’s IPO calendar has a deal. It is:
Cypress Sharpridge Investment (NYSE: CYS – proposed), a New York City-based specialty finance company investing in agency residential mortgage-backed securities and subordinated tranches of asset-backed securities, including collateralized debt obligations. The company is coming to market with a Form S-11 used for real estate investment trusts.
The underwriting has gone through a couple of investment bankers’ hands since it was first filed on April 19, 2007 –- over two years ago. Here’s what happened:
  • In its initial filing (S-11 for REITs), the joint-lead managers were Bear Stearns, Citi, Merrill Lynch and UBS Investment Bank.
  • In the Oct. 5 filing (S-11/A) the joint-lead managers were Bear Stearns, Friedman, Billings, Ramsey and UBS Investment Bank; the company announced plans to offer 18 million shares at $7 to $8 each.
  • In the Nov. 21 filing (S-11/A), the proposed pricing terms were deleted in its filing.
  • In the June 17, 2008 (S-11/A) filing, there was a new line-up of the joint-lead managers. It was Banc of America and Stifel Nicolaus.
  • In the Aug. 8, 2008, filing (S-11/A), there was a change in joint-lead managers. It was Banc of America and Lehman Brothers, with Stifel Nicolaus dropped into a co-manager spot.
  • In the Feb. 26, 2009, filing (S-11/A), there was another change in lead managers. Barclays Capital was named the sole lead-manager and Stifel Nicolaus remained in a co-manager spot.
Cypress Sharpridge plans to price its IPO of 8.5 million shares at $11 to $13 each after the closing bell on Thursday, June 11. It is expected to start trading on the New York Stock Exchange on Friday, June 12.
In view of the aftermarket performance of previous REITs to go public, don’t look for a moonshot opening-day pop from Cypress Sharpridge’s IPO.
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