Mid-December through mid-January is one of the seasonal periods when the IPO production line closes down. The other seasonal shutdowns are in July, from a week before the Fourth of July holiday to a week after, and from mid-August to mid-September, including the Labor Day holiday, when IPO issuance virtually stops.

But that doesn’t mean that investment bankers don’t feed the IPO calendar for December. (The same is true for the other seasonal lulls.)

From 1970 through 2003, December’s IPO traffic totaled 1,058 IPOs, according to available records. During that 34-year period, total IPO issuance was 11,492, the records show. So an “average December” would generate 10.1 percent of the annual traffic. An “average month” would generate 8.3 percent of the annual traffic.

This year, 2004 is expected to follow the time-honored script. The IPO traffic starts early in December and is expected to wrap up by mid-month.

Bankers expect to kick off December when they price Ninetowns Digital World Trade Holdings Limited, a China-based Internet company, on Thursday evening, December 2.

After that, bankers have another seven companies ready to go public during the week of December 6, and another 13 companies for the week of December 13.

As of the Thanksgiving Day holiday break, 202 IPOs have been priced so far in 2004, which have raised $39.88 billion. These figures omit five unit offerings consisting of common stock and warrants. The unit offerings raised $71.2 million.

Here’s how 2004’s IPO traffic compares with the last few years for the nine months from January through November:

·          2004: 207 IPOs

·          2003: 60 IPOs

·          2002: 79 IPOs

·          2001: 84 IPOs

·          2000: 423 IPOs

One of the long-standing rules of the New York Stock Exchange is that all member firms are equal. As we all know from day-to-day practice, some firms are more equal than others. (We learned this first by reading George Orwell’s Animal Farm.) This is especially true in the land of IPOs.

A preview of the 2004 IPO Performance

As Wall Street gets ready for December, let’s take a look at the 2004 book-runner scorecard for 11 months. This might be considered a sneak peek at the 2004 review.

As of November 24, the day before Thanksgiving, a total of 39 different book-runners priced 202 IPOs. In many cases, deals have more than one lead manager. But there is only one book-runner in a deal.

Up until the early 1990s, as many as 100 different investment banking firms would bring companies public. Not any more. There has been a sharp shrinkage in the cast of investment bankers for the recent IPO productions.

The business of IPO underwriting has become an oligopoly. For 2004, consider the following:

·          The top 10 book-runners accounted for 143 of the year’s 202 IPOs, or about 70.8 percent of the traffic.

·          The top 10 book-runners raised $35.24 billion of the $39.88 billion raised so far - or about 88.4 percent of the year’s total dollar volume.

·          And 23 of the 39 book-runners handled anywhere from one to three deals each.

Here is the 2004 Banker’s Scorecard on the top three book-runners, as of November 24.

Goldman Sachs:

·          Number of deals: 24

·          Amount raised: $7.56 billion

·          Average opening-day gain: 10.88 percent

·          Average gain: 35.57 percent (*)

·          Winners: 20

·          Losers: Four

·          The hero: Shanda Interactive Entertainment - up 262.55 percent

·          The goat: Leadis Technology - down 32.79 percent

Credit Suisse First Boston:

·          Number of deals: 18

·          Amount raised: $4.9 billion

·          Average opening-day gain: 16.15 percent

·          Average gain: 25.6 percent (*)

·          Winners: 13

·          Losers: Five

·          The Hero: NAVTEQ - up 115.45 percent

·          The Goat: Cherokee International - down 42.14 percent

Morgan Stanley:

·          Number of deals: 18

·          Amount raised: $9.29 billion

·          Average opening-day gain: 16.41 percent

·          Average gain: 59.36 percent (*)

·          Winners: 15

·          Losers: Three

·          The Hero: Rightnow Technologies - up 189.86 percent

·          The Goat: Staktex Holdings - down 68.62 percent

2004 IPO Scorecard:

·          Number of deals: 202

·          Amount raised: $39.88 billion

·          Average opening-day gain: 11.58 percent

·          Average gain: 30.66 percent (*)

·          Nasdaq Composite Index for 2004: up 4.95 percent

·          Winners: 152

·          Losers: 49

·          Unchanged: One

·          The Hero: Interchange - up 283.16 percent (book-runner: Roth Capital Partners)

·          The Goat: Staktex Holdings - down 68.62 percent (book-runner: Morgan Stanley)

(*) From an IPO’s initial offering price to November 24’s close.

To summarize 2004’s IPO market, by Thanksgiving Day, three of every four IPOs priced this year ended above their initial offering prices as of the closing bell on Wednesday. The average gain stood at 30.66 percent. The 2004 IPOs had outperformed the Nasdaq by 619.4 percent.

On the Launching Pad This Week

Ninetowns Digital World Trade Holdings plans to price 9.6 million American Depositary Shares (ADS) at $10 to $12 each to raise $105.6 million. The IPO is to start trading on Friday, December 3.

(Note: The ADS will trade only on the Nasdaq. The offering will not be subjected to the five-day delay between the pricing date and the trading date that the dual-listed Chinese IPOs are.)

Based in Beijing, China, Ninetowns Digital World Trade Holdings is a software company that enables enterprises and trade-related government agencies in the People’s Republic of China to streamline the country’s import/export process. The company has focused on providing enterprise software for the completion over the Internet of the processing of import/export declarations. Formed in 1995, Ninetowns Digital World Trade Holdings has about 530 employees.

The Underwriters: JPMorgan is lead manager. Acting as co-managers are Citigroup, Jefferies Broadview, and Lehman Brothers.

Venture Capitalists: Jitter Bug Holdings, AIG Asian Opportunity Fund, American International Assurance Company (Bermuda), Value Chain International, CFM Investments, China Equity Associates, Ever Praise Holdings, Huitung Investments (BVI), Titan I Venture Capital, Titan II Venture Capital Co, MMFI CAPI Venture Investments, UOB Venture (Shenzhen), and Ferndale Associates.

52-Week Percentage Change:

Dow Jones Software Index: up 15 percent

Nasdaq: up 7.64 percent

Dreaming of an IPO payday

December is getting off to a slow start, with just one deal on the IPO calendar for the week that begins on November 30 and ends on December 3.

But the IPO traffic is expected to gain momentum and pick up steam to roll through to its mid-month finale. For IPO bankers and investors, it’s enough to cause visions of holiday greenery decked out with dollar signs to dance through their heads.