IPO Market Regains Its Footing

by: Renaissance Capital IPO Research

As the IPO market regained footing this week with six companies successfully completing their deals, their mixed performance indicates investors continue to be selective given the heightened volatility that has ruled the equity markets over the past two months.

The only IPO to price above the midpoint of the range was highly-anticipated CBOE, the US's largest options exchange by volume. CBOE (NASDAQ:CBOE) raised $339 million on Monday after pricing its IPO at $29, at the top of its range of $27-$29, and saw its stock jump 12% in its debut. As the last major exchange in North America to go public, CBOE drove strong interest among IPO investors, who warmed to its proven brand and solid business model.

This week's top performer was college payment services provider Higher One Holdings (NYSE:ONE), which raised $108 million, 57% less than the originally sought $228 million, after pricing its IPO at $12, well below its $15-$17 range. Higher One is a one-stop-shop for colleges, students and parents and offers financial aid disbursement services, on-campus banking and an electronic tuition payment system. Despite raising less capital, the young, fast-growing company witnessed a first-day pop of 19%, the biggest pop since TeleNav (NASDAQ:TNAV) saw its stock rise nearly $23% in its mid-May debut.

In the largest IPO year-to-date, Oasis Petroleum (NYSE:OAS) raised $588 million after pricing 42 million shares at the midpoint of its $13-$15 range. The independent E&P, which produces oil in the Bakken formation of Montana and North Dakota, benefited from the past month's technical strength in oil stocks and climbed 6%.

The remaining three deals that priced this week did not fare as well in navigating the IPO market. Broadsoft (NASDAQ:BSFT), which provides IP-based application server software to telecom companies, closed down 8% on Wednesday from its $9 listing price. Motricity (MOTR) and China Intelligent Lighting (NASDAQ:CIL) both lowered their respective price ranges before coming to market Friday morning; both companies had broken their IPO prices before noon.

Though a high 49% of IPOs completed year-to-date have priced below their original ranges, the trend has moderated in recent months (as of the 1Q10, 70% of deals had priced below the range). Furthermore, an expanding IPO pipeline, which includes high-profile companies such as Tesla Motors (TSLA), Nielsen Holdings (NH), Zipcar (ZIP) and Toys "R" Us (TOYS), implies higher levels of IPO activity are likely for the second half of 2010.