The IPO Buzz: Storm Tracking

 

The stock market’s slide has put the IPO market on ice. Only 12 IPOs have been priced so far this year, according to U.S. Securities and Exchange Commission filings. That’s an average of about one deal a week, with Monday marking the end of the first quarter.

 

The life cycle of an IPO is much like a weather report on a tropical depression forming in the Caribbean. The IPO’s original filing (S/1) is noted and the deal goes into the IPO pipeline. Then the IPO’s momentum starts building when the company files an amendment (S/1A) with proposed pricing terms and it goes on the IPO calendar, waiting for a pricing date. This is much like a hurricane starting its northerly path from its birthplace, when the weather people begin predicting its direction and strength.

 

In the end, the hurricane can peter out, amounting to nothing, much like some of the withdrawals we’ve seen lately. Or the hurricane becomes a Zephyr, much like some of the medical equipment IPOs we seen lately. Or it can become a Category 5 hurricane, much like the recent Visa (NYSE: V) offering.

 

The one thing hurricanes and IPOs have in common — each takes time to develop.

 

On the other hand, secondary offerings can be much like a squall suddenly appearing from nowhere. They give no early warning notices.

 

Let’s take a look at last week’s equities traffic. These deals just happened to come to market during the first full week of spring.

 

On Monday morning, bankers had only two secondary offerings on the calendar, according to available sources. By Friday afternoon, they had priced nine such offerings and seven of those had not filed plans by the beginning of the week.

 

Here’s what we knew on Monday morning:

Bankers had MGIC Investment (NYSE: MTG) and Neutral Tandem (GMS: TNDM) on the equities calendar.

 

Then Wall Street’s syndicate desks went to work.

 

There you have it. Secondary offerings blow through town much like a squall. No early warning notices are given.