The IPO Buzz: Waiting for Daylight

Ten Years Ago
On July 20, 1998, the Nasdaq Composite closed at its then-all-time closing high of 2,049.25. Next, it took a spill and went into a downslide. Two-and-a-half months later, on Oct. 8, 1998, the Nasdaq closed at 1,419.12.
 
From January through July 1998, the IPO calendar had produced 44 deals per month, according to the U.S. Securities and Exchange Commission filings. That changed as the Nasdaq Composite slipped into a bear market. In September 1998, the calendar produced just three deals.
 
Once the bottom had been hit in 1998, it took about five weeks for the IPO production line to come back to life. From mid-November through December, the IPO calendar produced a total of 38 deals.
 
Fast Forward to the Present
On Oct. 31, 2007, the Nasdaq Composite ended at 2,859.12, its highest close since Jan. 24, 2001, when it finished at 2,859.15. To review: Almost a year ago, the Nasdaq reached its most recent closing high –- and that happened to be its highest close in seven years and 10 months.
 
From January through October 2007, the IPO calendar had produced 22 deals per month. That changed as the Nasdaq Composite slipped into a bear market. This year, the calendar has produced an average of six deals per month. In September 2008, it produced nothing.
 
Now we are waiting for daylight to break through the heavy clouds over Wall Street. It’s up to the Nasdaq to signal the dawn.
 
Two Brave Souls
In the meantime, there was some activity at the SEC’s filing window last week. Bankers set proposed pricing terms for two IPOs, but gave no pricing dates. The deals were:
 
Grand Canyon Education (GMS: LOPE proposed) (Quote, news & chart) is a Phoenix, Arizona-based online provider of post-secondary education services offering graduate and undergraduate degree programs in education, business, and health care. The company plans to price 10.5 million shares at $18 to $20 each to raise $199.5 million.
 
Now here’s some interesting reading: For the 12 months ending June 30, 2008, Grand Canyon reported net income of $3.1 million on total revenues of $125.5 million. In comparison, the company reported net income of just $71,000 on total revenues of $72.1 million for the calendar year ending Dec. 31, 2007.
 
Patriot Risk Management (GMS: PRMI proposed) (Quote, news & chart) is a Fort Lauderdale, Florida-based workers’ compensation risk-management company providing alternative market and traditional workers’ compensation products and services. The company plans to price 15 million shares at $10 to $12 each to raise $165 million.
 
More interesting reading: For the 12 months ending June 30, 2008, Patriot Risk Management reported net income of $2.6 million on total revenues of $43.5 million. In comparison, the company reported net income of $2.4 million on total revenues of $33 million for the calendar year ending Dec. 31, 2007.
 
Generally speaking, the IPOs that emerge from the bloodied trail of a bear market are companies with strong fundamentals, such as growth in revenues and net income, much like the two above. Stay tuned for pricing dates for these two.