IPO market reeling this summer
NEW YORK --Experts following the initial public offering market call it "the Vonage effect."
Vonage Holdings Corp.'s much-publicized IPO -- the value of which dropped 13 percent on the first day -- spooked Wall Street about how much investor appetite is out there for companies going public. The mantra for IPO investors this summer: Know before you go.
Out are companies deemed too complicated to understand or risky, especially in the beaten technology and telecommunications sectors. In are easy-to-understand companies investors can get their heads around.
"The market is still aching from Vonage," said David Menlow, president of IPO Financial Network. "I think what has happened for some companies is that the water has been tainted because of what happened to them."
"It's like looking at a pool of water and dropping a spoon full of oil into it," he added. "It looks like it should be OK, but the waters are now somewhat compromised."
And there's plenty of data to back up exactly how compromised the IPO market has been this summer.
Between June 1 and July 20, some 32 deals have been priced with a combined value of $4.06 billion, according to data tracker Dealogic Analytics. During the same period last year, 49 deals were priced at about $7.23 billion.
However, best illustrating how cruel summer it's been is by gauging how many public flotations were pulled. Most came amid a slump in trading for both the New York Stock Exchange and Nasdaq since May.
During the same time period, 17 deals carrying a value of $3.38 billion were pulled because of choppy market conditions. Only 9 deals worth some $1.57 billion were postponed in the year-ago period.
The latest example of this came Tuesday after CHG Healthcare Services Inc. pulled its IPO because of unfavorable market conditions. The Salt Lake City-based health care staffing company was selling 4.9 million shares at an estimated price of $15 to $17 each.
Last week, coated-paper manufacturer NewPage Holding Corp. and brokerage Ryan Beck & Co. cited market volatility forced them to scrub their stock market debuts.
BankAtlantic Bancorp, which owns Ryan Beck, said the spinoff was also postponed because the brokerage unit's second-quarter earnings were not up to snuff. Also not helping matters was the lackluster debut of French bank Societe Generale's flotation of U.S. investment banking unit Cowen Group Inc.
Like Vonage, Cowen Group's shares have not fared well since its IPO. Shares of the New York-based securities firm have dropped some 3 percent since listing on the Nasdaq on July 13.
The first day of trading has seen only modest interest for newly public companies since June 1 -- capturing an average gain of 3.4 percent, according to Dealogic. But, since the first day's gains, shares of these newly public companies have declined by an average of 1.1 percent.
The fate of a number of companies expected to price their shares over the next few weeks is still unclear. Among them are oil and gas explorer GeoMet Inc., Bermuda-based insurer Security Capital Assurance Ltd., specialty finance company Crystal River Capital Inc., and real estate investment trust Chart Industries Inc.
The Crystal River and Chart Industries public flotations are expected to raise $250 million each.
