The IPO Buzz: Waiting for the IPO Trade Winds

This is another week, another calendar with only one IPO, and the question remains: “Where is the IPO market?” The answer, my friends, is blowing though the canyons of Wall Street.

One look at the stock market’s close on Friday, March 6, answers the question. It shows the major U.S. stock market indexes mixed for the year. The Dow Jones Industrial Average was DOWN 0.44 percent, the S&P 500 Index was UP 2.21 percent, and the Nasdaq Composite Index was UP 4.80 percent.

For IPOs to flourish, stronger trade winds are needed than what has blown recently from the Trinity Church graveyard down Wall Street to the East River.

Signs of Hope

But there is some good news. There was The New York Times story on Feb. 19, 2015, which reported $48.3 billion was invested in technology companies in 2014 – UP 61 percent from 2013, according to a report by the National Venture Capital Association and PricewaterhouseCoopers. The story went on to report that this covered about 4,356 deals, but it did not give the number of companies involved in fund raising. Nevertheless, that is good news for future IPO calendars.

From January 2000 through December 2014, a total of 2,514 IPOs were priced, according to the U.S. Securities and Exchange Commission filings, or an average of 168 IPOs a year. The number of companies getting venture capital deals in 2014 should fill an IPO calendar for years to come.

This is the seed money going into companies that will eventually go public.

But for now there is a lack of leadership in the IPO market.

In the recent past, leadership came from the health-care industry. It looks as if that sector might be played out. From 2014’s fourth quarter through March 6, 2015, a total of 106 IPOs have been priced. Of that number, the health-care sector accounted for 38 deals – or about 35.8 percent of the total IPO traffic. And now there are done.

A Concrete Idea

This week’s single offering comes from the construction industry, a sector that is traditionally not a trailblazer in the IPO market.

Summit Materials (SUM – proposed) based in Denver, describes itself as one of the fastest-growing heavy-side construction materials companies in the United States. Summit supplies aggregates (made from limestone, sand and gravel, granite and trap rock) as well as ready-mix concrete, cement and asphalt paving mix. In 2014, 56 percent of Summit’s revenue came from the private construction market (both residential and non-residential), according to its prospectus. The remaining 44 percent of its 2014 revenue came from the public infrastructure market (roads, bridges and other projects). Summit’s aggregates business is focused on Texas, Kansas, Kentucky, Missouri and Utah. Its cement business is concentrated in Missouri, Iowa and Illinois.

Summit offers customers a single-source provider for heavy-side construction materials and related downstream products through its vertical integration. In addition to supplying aggregates to customers, Summit uses its materials internally to produce ready-mixed concrete and asphalt paving mix that may be sold externally or used in its paving and related services businesses.

Looking into the week of March 16, the calendar is clean and green as investors look to the bankers to fill in the blanks.

Stay tuned.


Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.