Capital Markets

IPO Pipeline Percolating

At least 24 companies are scheduled to go public over the next two weeks--a marked difference from the 14 such launches in all of July.
Stephen TaubAugust 1, 2005

With many investment bankers who sell initial public offerings and investors who buy the shares poised to leave for their summer vacations, a quick burst of IPO activity appears to be in the offing.

At least two dozen companies are slated to go public in the next two weeks, according to The Wall Street Journal.

By way of contrast, just 14 companies launched IPOs in all of July. In June — the first month this year that the IPO market showed signs of coming alive — 20 companies issued stock for the first time, according to the paper. In the entire month of August 2004, 20 IPOs were also issued.

“The IPO market has significantly improved over the last couple of weeks, and transactions are trading better in the after-market,” Craig Farr, co-head of U.S. equity capital markets for Citigroup Inc., told the newspaper. “At the same time, there’s more appetite among portfolio managers to look at new transactions, because they’ll have gotten through the earnings season.”

Investors as well as issuers are encouraged by the fact that last week, five companies saw their stocks finish up after their first day of trading, according to the Journal. Indeed, more IPOs reportedly priced above their expected range in July than in any other month in 2005.

Two of the most anticipated IPOs in the next two weeks are likely to be Baidu.com Inc., a Chinese Internet-search engine that’s sometimes compared with Google Inc., and WorldSpace Inc., an operator of satellite-based digital-radio services that was one of the founding shareholders of XM Satellite Radio Holdings Inc., according to the newspaper.

The expected IPO boomlet would follow some fairly fallow times. While the number of IPOs rose to 54 in the second quarter from 43 in the first, that’s still a big decline from last year’s second quarter, when 63 deals were priced, PricewaterhouseCoopers found in a recent report.

What’s more, the size of deals has continued to shrink. In the second quarter, proceeds fell to $9.3 billion from $10.8 billion in the first quarter, even though the number of deals increased by roughly 25 percent. In the second quarter of 2004, the 63 IPOs raised a total of $12.4 billion.