Tags: IPO | volatility | HD Supply | market

Market Volatility Douses IPOs

By    |   Friday, 28 June 2013 09:31 AM

Recent market volatility has created a bumpy road for initial public offerings (IPOs), causing companies to reduce their share prices and raise less cash or abandon their plans altogether.

IPOs around the globe raked in almost $20 billion during the first quarter. The United States was the top fundraiser accounting for about $9 billion of that total. According to Bloomberg, the lowest volatility in six years helped companies muster the courage to go public.

The strength and success in the market had many expecting even better results in the second quarter.

Editor's Note:
 
Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

"This may be the beginning of another golden age for IPOs," Mary Ann Deignan, head of Americas equity capital markets at Bank of America, told Bloomberg.

But now the market seems to have cooled off. According to The New York Times, the weaker sentiment in the IPO market is a boil-over effect from fears that the Federal Reserve will pull the plug on its quantitative easing program.

The volatility in the stock and bond markets has reintroduced caution into Wall Street, The Times explained.

HD Supply, one of North America's top distributors of construction, industrial and maintenance materials, decided the current housing recovery provided the ideal opportunity for an IPO. The company planned to price its shares between $22 and $25, according to Reuters, but when the company went public its shares were actually priced at $18.

Tremor Video, an online ad company, is the subject of a similar story. The company planned for its shares to be priced between $11 and $13, but they were ultimately priced at $10, according to The Times.

Some companies have decided that this is not the right time for an IPO after all. The current market conditions reportedly persuaded Votorantim Cimentos, a Brazilian cement company, to put its $3.7 billion IPO on hold, Reuters reported.

Investors are well aware that IPOs are high-risk deals, and they appear to be pushing for better terms from sellers and underwriters.

The current state of the IPO market could be especially difficult for companies owned by private equity firms The Times warned.

Many of those companies have high levels of debts and some private equity firms have had their money tied up since the earlier days of the financial crisis. Now, those firms are itching for their returns.

"What we've been seeing are deals that are being reconfigured," David Menlow, president of research firm IPOfinancial.com, told The Times. "Some companies will be able to endure such a process, while others won't."

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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Recent market volatility has created a bumpy road for initial public offerings (IPOs), causing companies to reduce their share prices and raise less cash or abandon their plans altogether.
IPO,volatility,HD Supply,market
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2013-31-28
Friday, 28 June 2013 09:31 AM
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