IPO VIEW-Three issues seen aided by profit history
By Holly Rosenkrantz
NEW YORK, Nov 1 (Reuters) - While the U.S. stock market's recent jitters have cleared most new offerings from the pipeline, three different issues are expected to be in hot demand in the first part of November because of their proven history of profitability.
Rupert Murdoch's Fox Entertainment Group (FOX - news), set to be the first major initial public offering since the blockbuster $4.4 billion deal from energy company Conoco Inc. (NYSE:COC - news), is the best known of these companies. Fox is made up of entertainment and media businesses being spun off by Murdoch's News Corp..
A smaller and perhaps less glamorous IPO from MONY Group (MNY - news), parent of Mutual Life Insurance of New York parent, is expected to generate strong demand, too.
The sleeper deal of the month is seen coming from Inet Technologies Inc. (OTC BB:INTI - news), a telecommunications equipment maker.
While these deals, each tentatively scheduled for the week of Nov. 9, are offering fundamentally different types of investments, all of the companies share the kind of earnings history that makes or breaks an IPO in the current market, which has been marked by extreme volatility.
''In this market, profitability is the equivalent of financial credibility,'' said Barbara Bradley, managing syndicate director at Laidlaw Equities Inc.
Indeed, analysts cited the lack of profit at Sprint PCS, the wireless telecommunications provider, as a key reason the big-name company would have trouble going public at a high premium any time soon. The company last week became the latest high-profile business to postpone its IPO.
Earlier this year, by contrast, demand for money-losing companies such as online retailer Cyberian Outpost (Nasdaq:COOL - news) was so strong that the company was able to raise more money than first planned. But many once-hot offerings have since slipped well below their IPO prices.
''Wall Street has been rather indiscriminate in the merchandise they've brought public, and companies without earnings have caused a lot of pain for investors with the recent market decline,'' said Roy McKay, a fund manager at Scudder Kemper Investments.
''Investors in these companies have lost 50-80 percent, and it's going to take a while for confidence to come back,'' he said.
Of course, profits alone are not going to guarantee that Fox, MONY Group and Inet Technologies become high-flyers in the coming weeks.
Analysts said Fox prompted some concern among investors about its ability to sustain advertising revenue in an economic slowdown.
And beside issues related the specific outlook for the insurance and telecommunications industry, analysts said MONY and Inet could raise concerns because the lead underwriter on these deals is Goldman Sachs -- a company that postponed its own IPO in late September because of market conditions.
''Goldman Sachs is still the premier investment bank, but it is an issue with some people,'' said Mark Basham, investment officer at Standard & Poor's.
Still, analysts said each of these companies have the kind of strong records -- Fox though movie and television hits like ''Titanic'' and ''Ally McBeal,'' and Inet though big clients such as AT&T Corp. (NYSE:T - news) -- that investors are requiring in this market.
''People are looking for established value now,'' Bradley said. |
