1999 marked record-setting IPO year
Forecasters see strong demand in 2000
By Steve Gelsi, CBS MarketWatch
Last Update: 7:41 PM ET Dec 23, 1999 NewsWatch
NEW YORK (CBS.MW) -- The year behind us rewrote the record books in the new issues market. The year ahead looks just as hot, as long as the markets hold.
Big companies spinning off units and issuing tracking stocks will keep fresh blood flowing. Some predict the IPO demand could surpass supply in the first few months of 2000. But as long as the bull market remains, IPO trackers expect another record-breaking year.
In 1999 a total of 510 IPOs raised $65.9 billion, the most in history. In 1998, a total of 363 deals raised $37.5 billion.
Three of the five richest IPOs in U.S. history were launched in 1999: No. 1 UPS (UPS: news, msgs) with $5.5 billion raised, followed by No. 3 Goldman Sachs (GS: news, msgs) and No. 4 Charter Communications.
Richest U.S. IPOs
Source: CommSan Analytics
Company Ticker Money raised Year
UPS (UPS: news, msgs) $5.5 billion 1999
Conoco (COCB: news, msgs) $4.4 billion 1998
Goldman Sachs (GS: news, msgs) $3.7 billion 1999
Charter (CHTR: news, msgs) $3.2 billion 1999
Lucent (LU: news, msgs) $3.0 billion 1996
All but two of the top ten first-day performers of all time roared through the market in 1999. The heady 698 percent gain from VA Linux Systems (LNUX: news, msgs) earlier this month topped the all-time list.
Top 10 IPO debuts
Source: CommScan Analytics
Rank Name Ticker Gain Date
1
VA Linux Systems (LNUX: news, msgs) 698% Dec. 9, '99
2
TheGlobe.com (TGLO: news, msgs) 606% Nov. 13, '98
3
Foundry Networks (FDRY: news, msgs) 525% Sept. 28, '99
4
FreeMarkets (FMKT: news, msgs) 483% Dec. 10
5
Cobalt Networks (COBT: news, msgs) 482% Nov. 5
6
MarketWatch.com (MKTW: news, msgs) 474% Jan. 15
7
Akamai Tech (AKAM: news, msgs) 458% Oct. 29
8
CacheFlow (CFLO: news, msgs) 427% Nov. 19
9
Datatec (formerly Glasgal) (DATC: news, msgs) 400% Dec. 10, '92
10
Sycamore Networks (SCMR: news, msgs) 386% Oct. 22, '99
Big surprise
"This entire year has been nothing but one layer of surprise on top of another," said IPO Financial Network's David Menlow, who's been tracking the sector for years. "The question is whether this is a new paradigm, or a pinnacle."
Menlow and other market watchers pointed to the Internet as the source of both the huge quantity of deals and stratospheric IPO gains this year.
In the mid-1990s e-commerce companies like Amazon.com (AMZN: news, msgs) and Web portals such as Lycos (LCOS: news, msgs)signaled the power of the Internet. This year the sector took off in new directions.
Linux players such as Red Hat (RHAT: news, msgs) and VA Linux Systems (LNUX: news, msgs) ignited with huge first-day gains.
Internet phone calling took off with Phone.com (PHCM: news, msgs) and Net2Phone (NTOP: news, msgs).
Business-to-business, e-commerce enablers such as FreeMarkets (FMKT: news, msgs), Commerce One (CMRC: news, msgs), VerticalNet (VERT: news, msgs) and PurchasePro.com (PPRO: news, msgs) hit a big sweet spot that will likely continue next year.
Internet networking and technology won investors hearts with darlings such as CacheFlow (CFLO: news, msgs), Brocade Communications (BRCD: news, msgs), Cobalt Networks (COBT: news, msgs) and Akamai Technologies (AKAM: news, msgs).
And Internet Capital Group (ICGE: news, msgs), which invests in Internet companies of all persuasion, topped them all with a staggering, split-adjusted jump of nearly 3,000 percent for the year.
Top 1999 performers
(As of Dec. 21)
Company Ticker 1999 Gain
Internet Capital (ICGE: news, msgs) 2,967%*
Commerce One (CMRC: news, msgs) 2,186%
Red Hat (RHAT: news, msgs) 1,735%
VerticalNet (VERT: news, msgs) 1,676%
Brocade (BRCD: news, msgs) 1,612%
PurchasePro.com (PPRO: news, msgs) 1,553%*
Vignette (VIGN: news, msgs) 1,511%*
E.Piphany (EPNY: news, msgs) 1,484%*
Liberate Technologies (LBRT: news, msgs) 1,478%
Phone.com (PHCM: news, msgs) 1,474%*
*Split adjusted Source: CommScan Analytics
Some lulls
The IPO market started off at a fast pace in January and continued strong until inflation fears cooled things off in the spring.
The market revived in late spring and early summer but skidded out in August.
One IPO that signaled a turning point for e-commerce retailers was the August debut of 1-800 Flowers (FLWS: news, msgs).
The stock seemingly had everything going for it -- a strong balance sheet, brand recognition, all-star investment bank Goldman Sachs as lead underwriter and an investment from Internet kingmaker Softbank.
Yet the stock fell below its offering price of $21. It signaled coolness in the well-tapped e-tailing category that continues to this day.
Crisp fall
Then in September, the IPO market revived again with Foundry Networks (FDRY: news, msgs) and a string of super novas that followed.
Stocks typically showed gains of 50 to 100 percent on their first day of trades, and the front-runners would often triple or quadruple.
Outlook
IPO tracker Menlow predicts more frenzy in 2000, especially if financial markets around the world weather any Y2K technical problems without major disruptions.
With only about 50 deals on the horizon in the first two months of the year, demand in the IPO sector may easily outstrip supply of new stocks.
He lamented the lack of fresh IPO concepts out there right now, other than gene research firms.
"Don't take that the wrong way," he said in a note to investors."We are looking for a very robust year, and the mediocrity only relates to the absence of new ideas and original platforms for the up-and-coming offerings."
One bright spot on the horizon is the spin off of Palm (PALM: news, msgs) from 3Com (COMS: news, msgs). It's already profitable, it's an industry leader, and it's playing in the hot wireless category.
Big corporations such as AT&T (T: news, msgs) and Cablevision (CVC: news, msgs) will likely to continue spinning off units or issuing tracking stocks. But it's uncertain if investors will abandon the parent companies once they're stripped of their flashy units or if the tracking stocks will hold their value over time.
Everyone loves checking out the new kids on the block. As long as the bull market continues, IPOs will stay hot in 2000.
Steve Gelsi is a reporter for CBS MarketWatch. |
