This week bankers plan -– or hope -– to price two special purpose acquisition companies, also known as SPACs or “blank check” companies, and each is a carryover from last week. There’s nothing more on the shelves. This is not a robust IPO calendar, but it is not the end of the world.
Let’s take a closer look at the two factors that have tapped the brakes on the IPO calendar.
A Look at the Stock Market
The stock market, as measured by the Nasdaq Composite Index, is far from investor friendly these days. It closed on Friday, Feb. 22, 2008, at 2,303.36, DOWN 13.2 percent for the year and DOWN 19.4 percent from 2,859.12, its previous closing high on Oct. 31, 2007.
From peak to trough, it was even worse. The Nasdaq Composite hit a 2008 closing low on Feb. 6 at 2,278.76, and that marked a slide of 20.3 percent from its most recent closing high on Halloween.
A pullback of this nature takes the starch out of IPOs.
Seasonal Lulls
The traditional seasonal factors putting the brakes on the IPO calendar are: The Christmas/Hanukkah/New Year’s holiday break running from mid-December through mid-January; the July 4th holiday, a two-week period (one week before and a week after the holiday) and the Labor Day holiday (a four- week period running from mid-August through mid-September).
But over the last few years, another seasonal factor has surfaced -– it’s a three-week period starting with late February and it runs into the first two weeks of March.
The obvious reason is the “earnings period” when companies report their end-of-the-year results.
Judging by the IPO traffic both at the pricing window and at the U.S. Securities and Exchange Commission’s filing window, one can only surmise that bankers have been advising their clients (with deals in the IPO pipeline and those planning on filing to go public) to wait until they get their year-end numbers in before going forward with their IPO plans.
There’s reason to believe this. Looking back over the last three years shows a three-week slowdown that starts in late February and runs through early March, and then a sharp pickup in IPO traffic for the rest of the year.
2007:
Priced
From Feb. 19 through March 9, a three-week period: 9 IPOs priced (weekly average: 3 IPOs), according to the Securities and Exchange Commission filings.
Balance of 2007 (43 weeks): 233 IPOs priced (weekly average: 5.7 IPOs priced)
Filings:
From Feb. 19 through March 9: 13 filings expected to raise $1.99 billion (weekly average: 4.3 filings expected to raise $665.6 million)
Balance of the year (43 weeks): 334 filings expected to raise $81.89 billion (weekly average: 7.8 filings expected to raise $2.05 billion)
2006:
Priced
From Feb. 20 through March 10: 8 IPOs priced (weekly average: 2.7 IPOs)
Balance of the year (42 weeks): 200 IPOs priced (weekly average: 4.8 IPOs priced)
Filings:
From Feb. 20 through March 10: 8 filings expected to raise $1.4 billion (weekly average: 2.6 filings expected to raise $1.2 billion)
Balance of the year (42 weeks): 286 filings expected to raise $49.99 billion (weekly average: 6.8 filings expected to raise $1.2 billion)
2005:
Priced
From Feb. 21 through March 11: 5 IPOs priced (weekly average: 1.7 IPOs priced)
Balance of the year (43 weeks): 233 IPOs priced (weekly average: 5.7 IPOs priced)
Filings:
From Feb. 21 through March 11: 11 filings expected to raise $2.01 billion (weekly average: 3.7 filings expected to raise $670 million)
Balance of the year (43 weeks): 288 filings expected to raise $48.2 billion (weekly average: 6.7 filings expected to raise $1.12 billion)
Now back to the present. We are entering into this newly emerging seasonal period -– late February to early March.
All this does is to underscore the old adage that statistics can prove any point one wishes. But there’s no denying that over the last few years, the IPO pricings and filings start picking up by mid-March.