IPO Performance Shows Rebound in Investor Demand

by: Renaissance Capital IPO Research

Two VC-backed tech firms and one family-owned bank holding company caused a high level of excitement in the IPO market yesterday, with all three soaring well above their respective IPO prices by the market close. Especially given Financial Engines' (NASDAQ:FNGN) 44% first day pop last week, it appears that the IPO market may be building momentum after the moderate deceleration in deal volume that began in mid-February.

MaxLinear (NYSE:MXL), a fabless provider of chips used for broadband video in electronic devices, raised $90 million by selling 6.4 million shares at $14, above the range of $11-$13. The chip company joined Financial Engines as only the second IPO this year to price above its range. Its stock closed at $18.70, rising 34% and claiming the number 7 spot on our list of greatest first day returns in the last 12 months.

Calix (NYSE:CALX), which provides hardware and software products to small and mid sized communication service providers (CSPs), raised $82 million by selling 6.3 million shares at $13, at the top of its proposed range of $11-$13. The stock climbed 16% in its debut, closing at $15.10.

MaxLinear and Calix were both highly anticipated by IPO investors, many of whom expect to see more activity in the telecom sector in upcoming months. The last time two IPOs that began trading on the same day both posted returns of over 15% was in December of 2007.

The third company to debut yesterday, First Interstate BancSystem (NASDAQ:FIBK), held its own, closing 8% above its IPO price of $14.50. The Scott family-owned bank holding company, which operates 72 branches in Montana, Wyoming and South Dakota, raised $145 million by selling 10 million shares at $14.50, near the low end of its $14-$16 range. Investors were likely attracted to the bank's steady performance and management throughout the economic downturn.

The last time three IPOs priced in one day and all exhibited positive returns was more than six months ago. In addition to the yesterday's three IPOs, this week's IPO calendar is also slated to see Alma Maritime (AAM), Redgate Media (RGM), Film Department Holdings (NASDAQ:TFDI) and China Lodging Group (NASDAQ:HTHT) come to market. With five more IPOs on the docket for the week of March 29th, this month has the potential to be the busiest week in IPOs in over two years.