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Disk drives? Who needs disk drives when we've got Martha Stewart and the WWF? Even with the market on the mat, the WWF will come out this week fighting. Indeed, I think they made more money last year than the entire drive sector: WWF offers a solid earnings record -- unusual for recent new issues. It posted net income of $56 million in the year ended April, up from $8.5 million in the previous year.
biz.yahoo.com
IPO VIEW-Wrestlers, Martha, Sycamore to
brave market
By Reshma Kapadia
NEW YORK, Oct 17 (Reuters) - The Dow's 630-point dive last week, the most withering weekly point drop ever, has oddly not sapped interest in this week's top initial public offerings: the World Wrestling Foundation, Martha Stewart Living Omnimedia Inc. and Sycamore Networks Inc., analysts said.
The media hype surrounding Martha and the wrestlers, along with magic of tech debuts, should allow the three to take
off despite stormy dealings in the stock market.
``I think it will obviously take some of the edge off premiums and it might also make some of the pricings more
reachable,' said Ward Morgenthau, senior vice president at Laidlaw equities, said the stock market's steep tumble.
``I think the market is a little sick here, but from what I see here, the top IPOs will likely make it,' he added,
commenting on last week's slide in stocks.
At Friday's close, those deals were still on board for this week. Some analysts, however, said that if the decline in the
broad market continues, underwriters may put off the launches.
Issues with lower profiles and less momentum will likely be put back.
``(The stock market fall) will be an event that will raise the bar for the IPO market,' said David Menlow, president of
IPO Financial Network. ``Those deals that may have been able to make it to market (before) may end up being pushed
back in the calendar.'
Several of last week's deals were pushed into this week after the stock market took a beating. Warnings from Federal
Reserve chairman Alan Greenspan to guard against the possibility of a downturn in asset values hit the market, while
wholesale inflation data came in twice as strong as expected, pointing to higher interest rates.
But hype and name recognition in the WWF and Martha Stewart deals are expected to get them over the hump.
Enthusiasm for networking firms also promises Sycamore Networks a strong reception, industry watchers said.
``WWF's deal is hitting the sweet spot. The timing couldn't be more perfect in terms of its growth, which is showing
broad momentum,' said Steven Tuen of IPO Value Monitor. ``I think investors will look at that type of growth as a
compelling reason to invest in the company.'
Professional wrestling's Vince McMahon will offer 10 million shares of his World Wrestling Federation empire in a
range of $14-$16, and underwriters said demand for the offering has been wild. Pro wrestling has become hugely
popular in recent years with pay-per-view events, toys, magazines and a Web site complementing its television and
arena events.
Also, this IPO is being viewed as a media and entertainment issue instead of a sports offering, kindling fervor for the deal even more.
WWF offers a solid earnings record -- unusual for recent new issues. It posted net income of $56 million in the year
ended April, up from $8.5 million in the previous year.
Martha Stewart's offering of 7.2 million shares in a range of $13 to $15 should attract solid interest on the strength of her
name alone. Stewart's empire, which analysts say has a loyal customer base, includes her flagship magazine, a cable
television program, how-to books, a Web site and radio show.
The company posted $111 million in net revenue and $14.1 million in net income in the first half of this year.
However, industry watchers echo one concern that the firm listed in its prospectus. If Martha left, she would likely take
the value of the company with her, a danger inherent in any firm heavily vested in its namesake, analysts said.
Nevertheless, they expected a strong premium for the deal.
Another sure-fire hit for the week is Sycamore, which plans to offer 6.5 million shares in a range of $18-20.
``I think Sycamore is going to be hugely successful because of the space it's in,' Tuen said. ``Right now investors are
focused on companies that fatten the (data) pipeline. Sycamore focuses on broadband and more specifically fiber optics.'
The IPO is also likely to benefit from expectations of strong results from recently-public firms in the sector.
As earnings season takes hold, analysts said the market will examine revenue growth at recently-public firms, like Red
Hat Inc. (NasdaqNM:RHAT - news), Foundry Networks Inc. (NasdaqNM:FDRY - news), and Juniper Networks Inc. (NasdaqNM:JNPR - news)
``For companies put on the market this summer, (revenue forecasts) look solid. The communication equipment firms,
especially, are poised to show excellent revenue growth,' said Matt Johnson, a growth analyst at Thomas Weisel
partners. ``I think the strength we have seen in the space will bode well for (companies like) Sycamore.'
Although most recently-public companies have carefully guided the market, the first couple of quarterly results after a
Wall Street debut are important, analysts said.
``You want your first earnings out of the gate not to disappoint. It's hard to get people to come back because there are
hundreds of other options. It may take four or five quarters of better-than-expected results to woo investors back,' said
Mark Basham, an analyst at Standard & Poor's. |
