Tags: Lehmann | IPO | price | smaller

JPM Securities' Lehmann: Smaller IPOs Are Good News

By    |   Friday, 14 June 2013 08:18 AM

More initial public offerings (IPOs) have been priced this year than in 2012, but many of the deals are for smaller companies and for less capital. Mark Lehmann, president of JPM Securities, says that's a good thing because it indicates positive sentiment among investors.

Renaissance Capital reports that 77 IPOs have already been priced for 2013, according to Yahoo, an 11.6 percent increase compared with the same period last year.

According to Lehmann, this is good news because it shows that investors are willing to buy the deals and the deals are working. It also indicates that issuers are thinking that the equity markets are the place to go to get fresh capital.

Editor's Note:
 
Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

"I think this is also a sign that they think things are going to get better going forward and that's where you want to raise your equity growth capital," he told Yahoo.

While the number of deals may have increased, the deals seem to be smaller, Yahoo noted. Proceeds are down nearly 39 percent compared with the capital raised at this time last year.

Lehmann admitted there are more small-sized deals, but he considers that to be positive.

"You have a group of investors who are willing to look at small and mid-cap growth companies and, again, bet on them going forward and say those are where I can get outsized gains."

Earlier this year, The Wall Street Journal indicated that IPOs among companies with less than $1 billion in sales had dropped 21 percent compared with last year. At the time, some expressed concerns about what seemed to be a decreasing number of smaller companies going public.

This decline occurred despite parts of the Jumpstart Our Business Startups (JOBS) Act that was implemented last year and designed to encourage smaller companies to go public.

Carter Mack, president of JMP Group, blamed the Facebook IPO fiasco last year for damaging the IPO market.

"That really took a lot of wind out of the sails for the IPO market overall," he told Bloomberg TV. "We really haven't seen the full test of the JOBS Act, and I expect we'll see a lot more activity in 2013."

According to Lehmann, the number of small IPOs indicates that sentiment is indeed changing.

"In the old, kind of slower tape that we saw back in the late 2000s and early 2010 and 2011, only the biggest and most able-bodied company made it public. People were definitely more risk adverse. Now they are a little bit more risk on," he told Yahoo.

"Risk on means they'll look at smaller companies, they'll look at more growth. And that's why you are seeing more IPOs of small growth companies. But again the reward is there if you're willing to play," Lehmann added.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

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More initial public offerings (IPOs) have been priced this year than in 2012, but many of the deals are for smaller companies and for less capital. Mark Lehmann, president of JPM Securities, says that's a good thing because it indicates positive sentiment among investors.
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2013-18-14
Friday, 14 June 2013 08:18 AM
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