IPO Market -2: Flow Of Strong New Issues Likely To Continue
01/27/1997 Dow Jones News Service (Copyright (c) 1997, Dow Jones & Company, Inc.)reprinted with permission
- SCPIE Holdings Inc. (SCPIE) of Beverly Hills, Calif., a provider of medical malpractice insurance in California, 2 million shares via Salomon Brothers, up 1 point.
- Administaff Inc. (ASF) of Kingwood, Texas, a provider of professional employer services, 3 million shares at $13 to $15 each via Morgan Stanley, up 3/4 to 1 point.
Last week's winner was RDO Equipment Co. (RDO), a Fargo, N.D., owner and operator of about 35 farm equipment and supply stores, primarily supplied by Deere & Co. (DE). The company priced 4.2 million shares at $15.50 each via CS First Boston. Price talk was $14 to $17. The stock opened Friday at 17 1/4, rose to 19 and closed at 18 1/8.
Despite the apparent revving up of the IPO market, at least one analyst sees bumps ahead. Steve Samblis , president of Samblis Financial Corp. in Longwood, Fla., sees a 10% to 15% drop in the broad market within 30 days and believes this would hit IPOs hard. The Dow Jones Industrial Average fell 59.27 points Friday, and Monday morning was down another 21 points.
He said this view is contrary to the current indicators, but noted that predicting future action in the market is more art than science.
'If the broad market drops sharply, anyone offered an IPO would say, 'Are you kidding? I lost 15% today,' ' Samblis said. 'No matter how good the deal is, investors will have other things on their mind. IPOs about to come out may pull back.'
Samblis said there's plenty of cash flowing into capital markets, but less of it is directed to riskier investments such as IPOs. Continued turmoil in the Japanese market could force some Japanese investors to sell U.S. stocks to cover their margins, creating downward pressure on the market here. Selling could beget selling.
'The bottom will be reached when people say 'Enough!' and start buying,' Samblis said.
Who can forget Intel Corp. (INTC) dropping to 51 1/2 on March 8, 1996? The stock has rebounded to a high of 155 7/8. It closed Friday at 150 1/2.
The IPO Aftermarket's Fitzgibbon said the severity and duration of any downturn in the broad market determine its effect on the new issues market.
'Recent headlines in the soaring stock market have been generated by stocks tracked by the staid Dow Jones Industrial Average,' he said. 'Obviously this can't go on forever. A short, quick drop in the broad market would be met by essentially no reaction at all in the IPO market - but a prolonged ground war, well, that's something else.'
IPO Value Monitor's Jacob said the market is now 'volatile' but 'relatively positive.'
'The volatility makes it dangerous to price new issues,' he said. 'But we seem to be flirting with new records every day. If the overall trend remains intact, I believe we'll see IPOs perform well.'
(END) DOW JONES NEWS 01-27-97
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