From the 8/21 Barron's on IPO's
I gotta throw in my 2 cents which is to say that the ultimate benificaries of the Net will be the consumer and solid business's that lower their cost and improve service buy utilizing the net in some fashion in their business. The "pure net" plays are simply a game to play at the moment (and as long as they go up and EVERYONE profits its fun......but), however every stock reaches it's judgment day when someone decides free capital, excessive losses can't become the norm. Lets face it these internet business suck from a investment standpoint! Barriers to entry? Assets? Business models seem to be a evolutionary process. The real winners will be the brick, morter and smokestack guys that can step in and improve their business by utilizing the net.
BTW they canceled my flight and I leave in the am
Best Regards,
Mad2
Only Sleeping
The IPO market is not dead yet
By Jack Willoughby
When the time comes to write the requiem for the Internet boom, let them remember that the flowers arrived on August 2. The day before the offering of 1-800-Flowers.com, Goldman Sachs, the underwriter, successfully raised the price of the flower delivery service to $21 a share. The stock opened the next day at $21.75, but then sank like a stone, touching a low of $13.50 on August 5. Since then, it's recovered a bit, to $16.50 late last week, still well below the IPO price.
Events seemed to crystallize around the Flowers offering. Since August 2, an astounding 22 deals have bitten the dust, including 15 in the week ended August 13 alone.
Not everyone, however, thinks we've seen the last of the 'Net extravaganza. "We do not believe the Internet run is over. Our customers are still seeking investment ideas in the Internet area," says Howard Posner, syndicate manager at A.G. Edwards, in St. Louis. "That's why we are building within our research and investment banking group the expertise to support our customers and the issuers we look to serve."
Richard Schultz, president of Triad Securities, a New York-based firm that follows domestic and foreign initial public offerings for institutions, agrees that the IPO market is not dead yet. "It's just a holding pattern, not the end. Historically, we've always had quiet summer months. Both domestically and internationally, the new issue market's going to get bigger by September."
Positive signals, however, are few and far between. Eleven of this month's 28 IPOs have traded below their offering price. And in the week of August 13, more than $1 billion worth of potential new equity capital simply disappeared. "That week was one of the worst deal-pricing environments I've seen in a year or more," says Michael Curtis, managing director in charge of the syndicate desk at Morgan Stanley Dean Witter. Indeed, according to New York-based CommScan Data, that week's withdrawals represent the largest number of broken deals for any week in this decade.
Some adjustment appears to have been inevitable. Even before August 2, the big firms had noticed weakness in technology issues. The percentage of this year's new technology issues trading below their offering price rose from 33% in June to 55% in July and 60% in August. Knocking the air out of the deals was the sharp downward slide in Internet stocks; between July 6 and August 10, the Dow Jones Composite Internet Index fell more than 30%. And buyers, who may be questioning the Internet stocks already in their portfolios, now have less money to commit to riskier new issues.
"We've had adjustments like this in the past, but this one appears magnified because of the fantastic volatility of the underlying stocks," says Lawton Fitt, managing director of capital markets and e-commerce specialist for Goldman Sachs. "When we get into markets like this, institutions tend to take smaller positions and figure that they'll round out their positions over time in the aftermarket." Choppy markets make syndicate managers cautious, ready to cut the number of shares or the issue price to get a deal to fly. Turmoil can easily unwind deals that appear oversubscribed by five or six times. That's why before pricing day the more experienced managers test and retest the "indications of interest" collected from potential buyers such as mutual funds, in the same way experienced seamen test the knots before a storm. These days it's the big, boring, workaday issues that receive favorable attention. While many deals missed their price targets, Credit Suisse First Boston brought out a successful Fairchild Semiconductor offering at its stated average price of $18.50. "We've certainly seen a broadening of the market," said David Hermer, director of equity syndicate for CS First Boston.
After Labor Day, look for several large issues, including United Parcel Services and Charter Communications, plus Webvan, the online grocery service.
Even with a resurgence in IPOs, 1999 will almost certainly fall short of the record levels of 1996, according to Richard Peterson, market strategist for Thomson Financial Securities Data in Newark, New Jersey. All the attention on Internet issues masks the relative slowdown in the number of deals. Only 320 non-Internet IPOs have come to market, excluding spinoffs, foreign issues, real-estate investment trusts and closed-end funds. That's considerably less than half the 719 plain-vanilla IPOs recorded in 1996.
|
