ReachLocal, Accretive Health IPOs Gain as Broader Markets Face Challenges

Includes: ACHI, RLOC
by: Renaissance Capital IPO Research

As fears over the European debt crisis dominated the broader markets this week, IPOs also saw a pullback in deals with only two IPO pricings this week: private equity-backed Accretive Health (AH), which offers outsourced revenue cycle management services to hospitals, and ReachLocal (NASDAQ:RLOC), an Internet marketing company that targets small businesses with its localized sales force. Both companies were forced to cut their offer prices by 20% and 28%, respectively, from the midpoints of their initial ranges, as investors pushed for a more attractive discount in the current buyer's market.

Despite pricing cuts, performance was strong and both deals gained as much as 13% by noon on Thursday, easily outperforming the Dow Jones and the S&P, both of which dropped significantly this morning as concerns over financial reform and rising jobless claims added to an already strained economic environment. Another positive sign for the IPO market was the record number of IPO filings last week: thirteen companies submitted S-1s to the SEC, the highest number in more than three years (since April 2007, excluding SPACs). With the pipeline expanding over the past few months, the IPO market is poised to continue its rebound as latent companies wait for a more receptive time to brave the markets.