By Phil Wahba
NEW YORK, Sept 19 (Reuters) - This week's battering of the stock
markets not only slammed companies once thought of as stable,
blue-chip stocks, such as financials.
The market were also merciless toward the stocks of newly public
companies, as investors fled to the safest securities they could
find, further putting off the long awaited recovery of the initial
public offerings market.
So far this year, according to IPO Index, a benchmark by
Connecticut-based research firm Renaissance Capital that tracks U.S.
IPO's from the past 24 months, IPO stocks are down nearly 29
percent. That compares with the Standard and Poor's 500 <.SPX>
decline of nearly 15 percent year to date. A week ago, the IPO Index
was down only 25.3 percent.
"Investors found it safer to throw them out and move to higher
ground," said Kathleen Smith, chairwoman of Renaissance Capital, of
the battered IPO stocks.
Newly public stocks are typically more volatile than the broader
market because there are relatively few of their shares in the
market and because of investors' lack of familiarity with them.
The current year has only seen 30 IPOs in the United States
launch, raising $26.7 billion in proceeds, making it the slowest IPO
market in five years, with only about a quarter of the activity at
this point last year, according to Thomson Reuters data.
Of those 30 new issues, only six have had positive returns since
their launch.
Two of those top performers, credit card operator Visa Inc
<V.N>, up 58 percent since its March debut, and risk consultant
RiskMetrics Group Inc <RMG.N>, once a unit of JP Morgan Chase and Co
<JPM.N> and up about 39 percent since January, were already well
known to investors.
Among the most volatile stocks has been GT Solar International
Ltd <SOLR.O>, the maker of solar equipment, which launched a $500
million offering in July. On Friday, it was down about 28 percent
from its launch but had been down as much as 48 percent earlier in
the week.
IPO'S WILL HAVE TO WAIT
This week's wild ride on the markets is likely to further delay
a resurgence in the IPO market, which has been moribund since last
November, Smith said.
"Issues can't be done when the markets are collapsing," said
Smith.
In what would be the first stock flotation in the United States
since early August, Fluidigm Corp, a California-based provider of
systems to optimize laboratory functions, had planned to price its
IPO on Thursday but has had to postpone and will to try again next
week.
The biggest problem for prospective offerings in a market this
rocky is the difficulty of getting their stories out to investors,
analysts said.
"Fewer people are willing to take on new positions when they see
their core stocks being eviscerated on a daily basis," said David
Menlow, president of IPOFinancial.com.
And their relatively thin trading makes matters worse.
"The illiquidity of smaller deals makes them be hard to sell
because they are so much more volatile," said Sal Morreale, who
tracks IPOs for Cantor Fitzgerald.
The average newly public company only makes about one third of
its shares available for public trading in its IPO, typically rising
to half within two years, as it builds a shareholder base, Smith
estimates.
The calendar of upcoming IPOs is likely to stay thin for
awhile.
As of now, in addition to Fluidigm, the only other IPO on the
calendar is a planned $350 million offering by Texas-based
environmental solutions provider Safety Kleen, expected to price the
week of Sept. 29.
This week's only new IPO filing was for a $1 billion deal by
Mead Johnson Nutrition, an Indiana-based provider of pediatric
nutrition products, and spin off of pharmaceutical giant
Bristol-Myers Squibb<BMY.N>. That compares with a more typical week
of late when there would be three to five filings of new offers.
In one way, this week's events could hasten the return of the
IPO market, analysts said.
"If it puts a bottom to the fear component, it shortens the
timelines for the IPOs to resume," Menlow said.
(Reporting by Phil Wahba; Editing by Marguerita Choy)
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Keywords: MARKETS STOCKS/IPOS