The Wall Street Journal-20080204-IPO Outlook- IPOs Slow on Broader Worries- Shortest Month Maintains Slow Pace Set in January- Blank-Check Deals Shine
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IPO Outlook: IPOs Slow on Broader Worries; Shortest Month Maintains Slow Pace Set in January; Blank-Check Deals Shine
Full Text (454 words)January was a chilly month in the world for initial public offerings, and observers don't expect a sudden warming trend in February.
Just five IPOs raised $892 million in the first month of 2008, compared with 10 that raised $2.25 billion in January 2007, according to data tracker Dealogic. Those numbers exclude real-estate investment trusts and blank-check companies without operating businesses.
Although bankers say it is too early to make predictions about new- stock listings for the remainder of 2008, they do expect the IPO calendar to be light this month; this week, only one IPO, from medical-device company Transoma Medical Inc., is likely to debut.
"Looking into February, I would not be surprised if I saw the same sort of behavior in the markets," says Mark Hantho, head of equity- capital markets at Deutsche Bank AG. "The IPO market in no way will be shut down, but it has put a higher bar up against companies that are facing uncertainty due to the economic environment."
In some ways, January seemed like a rehash of September's IPO market. Back then, just four offerings raised $882 million in the wake of investor unease over problems in the credit markets. As was the case in September, most of the deals this time priced within their expected ranges. Two new stocks generated double-digit percentage increases on their first day of trading: risk management and corporate governance specialist RiskMetrics Group Inc. and hospital staffing firm IPC The Hospitalist Co.
But unlike September, the uncertainty that plagued January appears more closely tied to the broader stock market and economy, with major U.S. stock indices ending the month down and investors scanning the horizon for signs of a recession.
"There is a distinct investor malaise, even though we've had deep cutting of interest rates. Investors are licking their wounds and assessing the depth of those wounds, and therefore, there's no urgency to begin investing in new ideas," says William B. Buchanan Jr., chief executive of Lazard Capital Markets.
Elsewhere in the IPO market: In a shift that would have been unimaginable five years ago, IPOs of blank-check companies -- firms without any operating business -- outpaced that of "ordinary" IPOs in January, with seven such deals raising a total of $2.5 billion, by Dealogic's count. Blank-check stocks, such as the Jan. 24 debut of Trian Acquisition I Corp., which raised $920 million, keep investors' money in a trust until they make an acquisition. Most are structured so that shareholders generally can receive nearly 100% of their investment back at the end of two years if no acquisition target is found. Such a limit on risk is attracting investors, according to Matthew Waxelbaum, an analyst at investment bank Legend Merchant Group.
