The IPO market blows into town this week like a three-ring circus. The calendar has four deals looking to raise over $1 billion – yes, one billion dollars - and the headliner is the much hyped Groupon (NASDAQ:GRPN) IPO.
Everyone has an opinion on this company and investment advice on its stock. The financial media is having a field day reporting these opinions/recommendations – for whatever they are worth. But there is one group of experts out there not yet heard from – Groupon’s investment bankers. They are muzzled by the “quiet period.”
The Securities Act of 1933 prohibits those involved in the underwriting and distribution of securities in registration from promoting the company. The ruling is an outgrowth of the years just before the 1929 stock market crash when pump-and-dump schemes were commonplace.
Now this is where it gets tricky. The quiet period is a 40-day waiting period after an IPO is priced. This applies to the issuer (the company - Groupon) and its managing underwriters, but it melts down to a 28-day waiting period for any of its other underwriters.
Groupon plans to offer 30 million shares at $16 to $18 each to raise $510 million. The deal is expected to be priced on Thursday evening, Nov. 3, to trade on Friday morning on the NASDAQ Global Select Market under the proposed symbol "GRPN."
Money, Oil and Fertilizer
In the Broadway musical “Hello, Dolly!” one of the most memorable lines from the widow Dolly Levi – especially if you were lucky enough to see Carol Channing in the role – goes like this: “Money is, pardon the expression, like manure. It doesn’t do any good unless it’s spread around, encouraging young things to grow.”
Dolly, of course, was on to something. Her idea has at least a symbolic link to the industry sectors – money, oil and fertilizer – represented by the three other companies on the IPO calendar this week:
Selway Capital Acquisition is a “blank check” offering that is being carried over from last week. The company plans to offer 2.75 million units at $10 each to raise $27.5 million. The lead managers are Aegis Capital and Chardan Capital Markets.
Enduro Royalty Trust (NYSE:NDRO), based in Austin, Texas, is a trust that was recently formed to own royalty interests in oil and gas production properties in Texas, Louisiana and New Mexico. The company plans to offer 13.2 million units of beneficial interest at $23 to $25 each to raise $316.8 million. The IPO is expected to be priced on Wednesday evening, Nov. 2, and to trade on Thursday morning on the New York Stock Exchange under the proposed symbol “NDRO.” Joint-lead managers are: Barclays Capital, Citigroup, Goldman Sachs, RBC Capital Markets and Wells Fargo Securities.
Rentech Nitrogen Partners, L.P. (NYSE:RNF), based in Los Angeles, is a recently formed limited partnership to own, operate and grow a nitrogen fertilizer business. The company plans to offer 15 million shares at $19 to $21 each to raise about $300 million. The IPO is expected to be priced on Thursday evening, Nov. 3, and to trade on Friday morning on the New York Stock Exchange under the proposed symbol “RNF.” Joint-lead managers are: Morgan Stanley and Credit Suisse.
Out-running the Bear
In summary, there are four IPOs on the calendar expecting to raise $1.15 billion.
With over $1 billion on this week’s calendar, that raises the question: “Is the IPO market back?”
The answer: Only time will tell. Nevertheless, there are some clues. Consider the following:
Historically, the IPO market follows the underlying stock market. It is not a leader. You can look at this year as an example.
The U.S. stock market hit its high for the year at the end of April. The IPO production line followed and carried over into May. During those five months, the calendar produced 75 IPOs, according to the U.S. Securities and Exchange Commission filings. Then the stock market took a swan dive to its October lows and the IPO market dried up. No IPOs were priced in September.
Looking at the current stock market, it’s worth noting: Some gurus have been preaching that stocks’ recent recovery is nothing more than a bear market rally.
The U.S. stock market never slipped into bear market territory – it came close, but no cigar.
The definition of a bear market is a 20 percent drop from its recent high. The Dow Jones Industrial Average, measured from its closing high to its closing low, lost 16.8 percent. As of Friday’s close, Oct. 28, the Dow has recovered 14.8 percent from its low. The S&P 500 lost 19.4 percent from its 2011 closing high to its closing low for the year, and it has recovered 16.9 percent. The Nasdaq Composite Index lost 18.7 percent from the year’s closing high to its closing low and it has recovered 17.2 percent.
No bear market in those numbers.
Mark Twain once said, “If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re misinformed.”
If Mark Twain were following today’s financial news, he would probably say “watch TV” instead of “read the newspaper.”
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.