IPOs to gather steam, but still waiting for blockbuster deals
NEW YORK, Jan 28 (Reuters) - After a respectable start to the year with a healthy debut for Starbucks alternative Peet's Coffee and Tea (Nasdaq:PEET - news), the IPO market will gather a little more steam this week.
A handful of offerings are scheduled, including ATP Oil and Gas and Exact Sciences. But investors are looking further into February for the first blockuster deal of the year -- KPMG Consulting. One of the world's largest technology consulting firms, KPMG is slated to go public in the week of Feb. 5, in an offering that could be worth around $2 billion.
``It's all a warm up for what's going to be coming later,'' said Irv DeGraw, research director at financial information provider WorldFinanceNet.com.
``In a lot of ways these IPOs are like stalking horses that are helping us establish what the valuations are going to look like.''
Nasdaq just enjoyed its third successive weekly gain, and some investors are hopeful the rally will soon flow through to the market for new offerings, which take their cue from the technology-heavy Composite Index (^IXIC - news).
``You will start to see a pickup in IPO activity if this rally continues for another couple of weeks,'' said Christopher Ely co-manager at Loomis Sayles Small-Cap Growth Fund.
``Part of the reason that IPOs got into trouble is that there are so many attractive companies at much lower prices today than six months or a year ago,'' Ely said.
``Why buy some unknown company's IPO when you can buy existing stocks that have been publicly traded for a year or more?''
Nasdaq closed on Friday at 2,781.30 with a slight gain of 0.4 percent for the week, and it is now up 12.6 percent for the year to date.
On Wall Street this week, all eyes are on the Federal Reserve chairman. If Alan Greenspan delivers another deep interest rate cut stocks will rally, although the IPO market needs a sustained technology rally to drive it into high gear.
A MODEST WEEK FOR IPOS, NO FIREWORKS EXPECTED
An energy company, biotechnology and healthcare firm are set for their Wall Street debut this week.
``It will be another week of modest average companies that will get done -- but they're just not going to set the world on fire,'' DeGraw said.
Xenogen is scheduled to go public early in the week, after postponing its IPO scheduled for last week. The biotech firm lowered the estimate price of its offering of 7 million shares to $9 a share from a range of $10-$12 per share.
ATP Oil and Gas, a natural gas producer is also on the block. It is offering 7.5 million shares at $15-$18. Later in the week Exact Sciences, which is working on a test for colorectal cancer based on genomics technology will have an
Ipo.
Peet's Coffee and Tea broke the IPO drought last week, with the first offering for 2001.
The gourmet coffee chain and coffee roaster delivered a mild caffeine hit to the market, rising more than 17 percent on Thursday, its first trading day. Peet's did even better on Friday, soaring nearly 40 percent to close at $13-1/16. This brought it close to the top end of its original price range of $10-$14, before the company lowered the range to $8-$12 in a last minute filing with the Securities and Exchange Commission.
KPMG COULD BE FIRST BIG DEAL OF 2001
The IPO market nearly dried up in late 2000 as technology stocks slumped, and only recently emerged from its winter slumber. It could really receive a much-needed jolt after Feb. 5, when KPMG Consulting, one of the big five U.S. accounting firms along with Arthur Andersen, Deloitte & Touche, Ernst & Young and PricewaterhouseCoopers, is in line to go public.
The price range on the IPO, which is being managed by Morgan Stanley Dean Witter, as well as Goldman Sachs, J.P. Morgan and Merrill Lynch, rose to $16-$18 a share from $6.75-$8.75, earlier in January. In its filing with regulators, KPMG said it is offering 112 million common shares.
``After an IPO drought you sometimes get the best deals coming out first because they're the ones that can get done -- the deals of highest quality,'' said Loomis Sayles' Ely.
``Institutional investors are not going to go out and invest in very young companies with no earnings which were the kind of stocks they were buying a year and a half ago.''
Some investors are waiting to see if KPMG revises the terms of its IPO again. ``It wouldn't surprise me if it got a little bit cheaper,'' said DeGraw.
The hope is that KPMG will enjoy a respectable debut - and respectable these days means a gain of anywhere between zero and twenty percent, De Graw said. |
