IPO Market Is Healthier Amid Volatility
6/6/99 2:06:00 PM
By Reshma Kapadia
NEW YORK (Reuters) - The initial public market is recovering some of its health as recent market skittishness has tempered the cybermania that had driven it into a frenzy in recent months.
The market is being characterized as hesitant, with underwriters pushing back a handful of deals in hopes of waiting out the recent market volatility that has been created by the specter of higher U.S. interest rates and the absence of an Internet stock rebound, analysts said.
E-Loan, Backweb Technologies, Mypoints.com and lowestfare.com's IPOs were all pushed back on underwriters' calendars.
''The market is still on edge and (people) don't know where the market is going. It's better to lick the wounds and price another day versus forcing the deal in a bad market. I don't think the market is improving as well as they would like,'' said Steven Tuen, an analyst at IPO Value Monitor. ''I think some underwriters thought they would see a bounce-back (in Internet stocks) and they haven't seen that yet in some of the bellwether Internet stocks.''
Underwriters are raising the size and range of the IPOs less frequently and investors are bidding up the stock's price gradually rather than giving it a stratospheric premium upon its debut, analysts added.
''It's a fertile market for those who were shut out of the IPO. It's also a healthier sign for the market because (before, the market) had every excuse to fall apart like a cheap watch,'' said David Menlow of IPO Financial Network in Millburn, N.J.
Friday's debuts demonstrated that investors still had an appetite for strong offerings with brand recognition. They rewarded online brokerage and investment bank Wit Capital Corp. and High Speed Access, which provides Internet access through cable modems -- albeit in a more sober manner than the high-flying cyber IPOs of late.
''There is a lot of air coming out of the balloon and some of the less-seasoned companies are probably going to have to take a backseat for a while,'' said Dick Smith, managing director of syndicate at Banc of America Securities.
Yet another sign of a healthier market is the widening breadth of IPOs in the pipeline as more and more non-Internet related offerings come to the forefront.
''What's happening, which is a reflection of the overall market, is that we are getting a broadening of the market and that is being reflected in that we are seeing more diverse sorts of IPO activity,'' Smith said. ''Interment IPOs may be dying down but the rest may be waking up.''
In the coming week, footwear firm Skechers, convenience store chain operator Pantry Inc. are among the non-Internet deals slated to hit the market.
''I think investors will take a second look now as opposed to early in the year when they ignored non-Internet deals. Non-Internet IPOs have more of a chance now,'' Tuen said.
Skechers plans to offer 10.71 million shares in a range of $13 to $15 through lead underwriter BT Alex Brown, and Pantry plans to offer 6.25 million shares in a range of $15 to $17 through Merrill Lynch.
''Pantry is a huge deal,'' said Steve Lacey of the IPO Reporter. ''It could be an important barometer for the market if they get it done and priced. Even with limited performance, it's definitely a positive sign because that is a completely traditional retail deal, which we haven't seen in awhile.''
And of course, there are still Internet deals in the line-up. Phone.com, which provides software that enables the delivery of Internet-based services to wireless phones, online health care network drkoop.com, which is headed by former U.S. Surgeon General C. Everett Koop, and Spanish search engine quepasa.com are expected to be the hottest of the batch.
Industry watchers noted that the number of filings has not slowed down and deals are still filling up calendars, confirming that the IPO market is not drying up as it did last year. |
