initial public offerings (IPOs) trading on American exchanges

Friday, May 25, 2012

As Facebook falls, IPO pullback begins

(MarketWatch) — Corsair Components Inc., which makes computer storage memory and gaming products, and Tria Beauty Inc., whose laser-hair removal and esthetic products are likely to been seen in late-night infomercials, might be as diametrically opposite as two companies can be.

However, by Thursday, the two companies had one thing in common: Both had postponed their initial public offerings in the wake of the now-controversial debut of Facebook Inc. (NASDAQ:FB)  
“Corsair and Tria postponed their offerings and that doesn’t surprise me in the least,” said Scott Sweet, senior managing partner with IPO Boutique. “Who would have predicted a week ago that the biggest debacle in IPO history was about to go down?”
Normally, it wouldn’t be such a big deal for such small-cap companies to pull back from going public. Sweet said both Corsair and Tria would likely have had to drastically cut their proposed price ranges if they had gone ahead with their offerings.
Corsair had earlier said it hoped to sell almost 7 million shares at between $12 and $14 each, while Tria set a range of $13 to $15 a share for the 4.6 million shares it had intended for its public stock offering.
But while both companies simply cited the generic “market conditions” reason for their delays, the fact that the postponements came during a week of ongoing fallout over Facebook’s IPO suggests that big changes may be in the works regarding what type of companies will have the fortitude to test the public market’s appetite for investing in IPOs. 
The line of companies looking to go public hasn’t completely shrunk. Since late March, IPO filings have come from the likes of ServiceNow, which does software-as-a-service, Reval Holdings, a cloud-computing software company, and online legal services provider Reval’s lead underwriter is Bank of America/Merrill Lynch (NYSE:BAC)  , while ServiceNow and LegalZoom have Morgan Stanley (NYSE:MS)   — which led Facebook’s IPO — as their lead underwriter.
Network-security technology company Palo Alto Networks, which filed to go public on April 6, also has Morgan Stanley as its lead underwriter. Analysts have pointed to Palo Alto Networks, which specializes in information security for enterprises, as candidate for a solid IPO.
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Officials from Palo Alto Networks refused to comment on whether the debacle surrounding Facebook over the last week has altered any of their IPO plans.
That debacle involves Facebook’s less-than-stellar opening day performance, followed by what has been a decline of more than 16% from the company’s $38-a-share IPO price. It also includes the Nasdaq’s botched handing of the IPO out of the gate, and now, lawsuits against Facebook and its lead underwriters, including Morgan Stanley, over information that might not have been shared with potential investors.
“There are going to be some more lasting effects,” said Kris Tuttle, director of research at Soundview Funds. “For one, individuals were largely out of the market, and this cements that trend.”
Sweet, of IPO Boutique, said that of the 187 companies that he says have filed the necessary documents to go public, “It should be noted that there is not a single IPO in the pipeline that has set pricing terms.” Sweet also noted that IPO pricings typically slow down around the Memorial Day holiday week in the U.S.
“Whether its tech, consumer goods, or oil, there’s not likely to be anything going on for a couple of weeks,” Sweet said.
James Krapfel, equity analyst with Morningstar Inc., agreed that regardless of the type of company involved, IPO activity is likely to slow down considerably over the coming months, due to several factors, not the least of which is a typically slower overall business environment in the summer.
“It’s partly due to the Facebook fiasco,” Krapfel said. “But also because the weaker stock market will make it increasingly difficult for lower quality companies, which constitute the majority of IPO backlog, to successfully price their shares.”

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