I look at it the other way around. If a bad quarter was in the offing, they would not do an offering, as lawsuits would follow immediately if the offering closed before the bad results are announced (assuming the price tanks, of course). MRVC will indeed tell the underwriters how the quarter went, however, this information is not supposed to be passed on to potential investors during the road show ON A SPECIFIC BASIS. The company can say it is comfortable with analyst earnings estimates, talk about its business and financial model, etc. to give the investors comfort. Since current estimates are for a flat or nearly flat quarter (.19-.20) with last quarter, MRVC should be able to provide comfort for that number. Given the past growth rate, I imagine many people are expecting .21-.22 and that this number may be built into the current stock price.
The underwriters do not want to take on a new client that has bad news ahead in the next six months, although it does happen due to unforeseen events or less than candid management.
As to the ultimate offering price, the underwriters want their customers to make money, too, and may try to hold the price at current levels and let it pop the day after the offering is priced. I don't know how the price is held at certain levels, but have seen it time and again in these situations with companies that are not followed and are getting new coverage. This is what happened in the SFAM offering earlier this year-it closed at 33-1/4 when the offering was priced-two trading days later it closed at 39. MRVC's price configuration so far feels similar to the SFAM pre-offering pattern to me (I am admittedly biased) and I am looking for a $4-5 move from here to $32-33 after the offering. Low volume days with little price movement heading into the offering will IMHO likely lead to a pop after the offering is priced. At 28, the stock could pop back to 30 or so (the current resistance) and allow "flippers" to make a couple of bucks-this expectation by certain investors is the grease that allows 10-15% of a company to be sold essentially "at the market" without disturbing the current market price. |
