Capital Markets

IPO Pipeline Nearing Dotcom Quantities

The fourth quarter of 2004 could be the first time that the number of initial public offerings hits triple digits since 125 companies raised a litt...
Stephen TaubOctober 6, 2004

Initial public offerings continued their resurgence in the third quarter as 65 companies sold stock through IPOs, according to the Boston Globe, citing data from Thomson Financial.

For the first nine months of 2004, volume rose 407 percent to $29 billion compared with the year-ago period, and revenue climbed 327 percent to $1.5 billion, according to Reuters, citing data from Dealogic.

What’s more, nearly 170 companies are currently in registration but haven’t priced their offerings, according to both reports. “The pipeline is pretty robust right now,” Richard Peterson, chief market strategist at Thomson, told the Globe. “We’re estimating that about 100 IPOs will be priced in the fourth quarter.”

If he’s right, this would be the first time that the number of IPOs would hit triple digits since 125 companies raised a little more than $15 billion in the third quarter of 2000, the newspaper added. Just five companies went public in each of the first two quarters of 2003, but since then the market has been slowly rebounding.

Not all the IPO numbers are so rosy, however.

While Google’s successful offering dominated the headlines, nearly 46 percent of third-quarter IPOs were priced below expectations, according to the Reuters report. And the number of withdrawn or postponed deals reached its highest quarterly total in nearly four years.

The biggest driver of the IPO market is the equity markets in general. If stocks are performing well and investors are upbeat about the future, they are hungrier for hot new issues and more receptive to companies below blue-chip quality. In the fourth quarter, if investors are distracted by a contentious presidential contest and the possibility of a lame-duck Bush administration, they’re more likely to hold on to their wallets.

Whatever the future may hold, however, on Tuesday investors certainly seemed eager enough. Restaurant chain Texas Roadhouse Inc. surged more than 27 percent in its debut, while pharmaceutical firm Theravance Inc. jumped 12 percent. Both companies had increased the size of their offerings, which were priced above expectations, according to the Associated Press.

Texas Roadhouse, which had anticipated going public at between $15 and $17, eventually sold 9.1 million shares at $17.50 apiece, raising about $159.3 million. Theravance sold 6.15 million shares at $16 apiece, nearly 1 million more shares than anticipated and higher than its expected price of $13 to $15, enabling the company to raise more than $98 million.

Seven more companies are expected to go public later this week.