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This Week's IPOs Hope to Repeat CBOE's Rousing Debut

Monday, 21 Jun 2010 08:46 AM

A smattering of companies will try to make initial public offerings this week following the breakout debut of CBOE Holdings, though few are expected to do as well in what has become a decidedly dicey year for the market.

Shares in the Chicago options exchange sold at the high end of what both the company and its underwriters had expected, which is remarkable given this year's IPO wrecking yard.

And the coattails for companies that would typically get a boost from IPOs like that are very much out of style in 2010.

"It has no influence whatsoever in any future offering, and the IPO market is still very much in an unhealthy mood," said Scott Sweet, who owns research firm IPO Boutique.

Yet there's no lack a variety this week.

Attempting to make a debut are real estate investment trust Hudson Pacific Properties and also Fabrinet Co., a maker of components for optical communications systems.

Oil and gas company Resaca Exploitation Inc., which already trades on an international exchange for small companies, is seeking a listing on a U.S. exchange. Video ringtone service Vringo Inc. may also begin trading.

Could any of them post a double-digit gain on the first day of trading, like shares of CBOE Holdings Inc.?

"There isn't anything that jumps out about these stand-alone deals, and right now investors are looking at these case-by-case for a spark," said John Fitzgibbon, who tracks market at IPOScoop.com.

Sweet said investors need to forget about CBOE because it's not an indicator of better things to come this year for IPOs.

"CBOE would've done well in any market," Sweet said.

For others, there is this: half the companies that have made it to the IPO market this year have priced below expectations, the highest proportion in more than a decade. Many companies, sensing a washout, have just pulled up stakes and canceled IPOs or postponed them.

That didn't let up in the immediate shadow of the CBOE offering. Several companies priced their IPOs far below expectations.

This week, Hudson Pacific, which buys, owns and operates office properties in Northern and Southern California, hopes to raise as much as $243.2 million.

REITs have not done very well this year. And the 2 percent dividend that Hudson Pacific has offered is unlikely to create a stampede in a sector that typically pays out dividends of 7 percent to 8 percent, Sweet said.

"REITs really don't come rushing out of the gate, and I don't expect this one will," added Fitzgibbon.

In a recent filing with the Securities and Exchange Commission, Hudson said it planned to sell about 12.8 million shares for between $17 and $19 each. It will be listed on the New York Stock Exchange under the ticker symbol "HPP."

Fabrinet, which is based in the Cayman Islands, faces stiff competition and has relatively few clients, Sweet said. The company also said it will stop paying dividends after it goes public, which could make investors cringe.

Fabrinet plans to raise $31.8 million by selling 2.83 million ordinary shares, while some existing shareholders will sell another 5.67 million shares. The IPO is expected to be priced between $12 and $14, and the company will trade on the New York Stock Exchange under the ticker symbol "FN."

Resaca, which currently trades on the London Stock Exchange's Alternative Investment Market, is expected to start trading on the NYSE Amex under the ticker symbol "RSOX." The company plans to raise about $68 million selling 20 million common shares for an expected price of $3.20 to $3.60.

Institutional investors pay little attention to stocks under $5, while companies making a secondary offering in the U.S. "never really make a big splash," Sweet said.

The next company with any star power arrives next week.

Though even for the revved up electric car maker Tesla Motors Inc., a celebratory champagne shower is no guarantee.

Tesla, which makes the $109,000 Roadster sports car, wants to raise $185 million next week, according to IPO research firm Renaissance Capital.

It's only one week removed from the attempted IPO from solar energy company Solyndra Inc., which had generated a lot of buzz.

Solyndra canceled its IPO Friday.

"Price sensitivity has become the norm, so even popular companies are coming in the low range," Sweet said. "There is practically no interest in IPOs right now."

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