Market sell-off claims IPOs; 8 cancel deals
NEW YORK (AP) — Wall Street's recent gloom is laying waste to the hopes of companies planning to raise money from investors.
Of the 11 companies that had been slated to go public this week, eight have canceled their initial public offerings and one has slashed its deal size in order to get the transaction done.
The recent volatility in the stock market is hurting demand for IPOs. That's a reversal from earlier this year, when big debuts from technology and retail companies had analysts predicting the strongest year for new listings since before the recession.
For eight companies to have canceled their IPO plans for this week is "serious," said longtime IPO researcher Scott Sweet, the owner of IPO Boutique. It sends a signal to other companies to wait.
Two weeks ago, Sweet said, he would have expected the number of deals for 2011 to be bigger than in 2008, 2009 and 2010 combined. That would have been more than 248 deals, according to data from Renaissance Capital — the most since the dot-com boom at the turn of the millennium. Now, with just 93 IPOs completed this year and all of this week's cancelations, that's no longer likely to happen, Sweet said.
Only one company has gone public in August, after eight launched in the last week of July.
Two-thirds of those recent IPOs have declined since hitting the market, losing their investors money in this month's market rout.
The Dow Jones industrial average has dropped nearly 15 percent in less than three weeks.
"This kind of movement in the market that we've seen is definitely going to put IPO plans on hold for many companies," said Darren Fabric, the managing director of IPOX Capital Management, which invests in initial public offerings.
Unless that company is a standout, one that investors have been eagerly anticipating for months, like Zynga, Fabric and Sweet both said. Zynga Inc. makes Internet games, like FarmVille and other Facebook games. It has said it hopes to raise up to $1 billion.
Daily deals site Groupon Inc. has also filed its initial IPO papers. Its IPO is expected as soon as next month. But while Groupon has posted strong sales growth, critics have noted its unprofitability. It posted an operating loss of $102.5 million in the second quarter because of high costs for marketing and other expenses.
Zynga and Groupon are expected to go public this year. Both companies part of a wave of technology IPOs that have caused market watchers to wonder whether investors are overvaluing Internet companies —the same as they did during the late 1990s dotcom bubble era. But recent technology IPOs have also sold off deeply in the market slump of the past few weeks.
Real estate listings site Zillow Inc., which rose as high as $60 the day it went public in mid-July, closed Wednesday at $27.27. Internet radio station Pandora Media has dropped by nearly a third from its close on the first day of trading back in June.
LinkedIn Corp., the jobs networking site, more than doubled in its debut in May, the biggest surge for a U.S. company this year. It's down nearly 10 percent since that first day's big gain, having dropped 17.5 percent since July 22.
The IPOs scheduled for this week that pulled their offerings are:
— Cathay Industrial Biotech Ltd.
— Enduro Royalty Trust
— HomeStreet Inc.
— InvenSense Inc.
— Loyalty Alliance Enterprise Corp.
— Tim we. SGPS S.A.
— WageWorks Inc.
— WhiteGlove Health Inc.
Of the companies still expecting to go public, Carbonite Inc. cut the price it expects for its shares to $10 to $11 per share from $15 to $17 per share. Investors are also awaiting issues from SandRidge Permian Trust and Trustwave Holdings Inc.