Yes, there is life after the election. Now that voters have made their choice, Wall Street can get back to the basics: Interest rates, earnings, and, oh yes, politics. The IPO market pays attention to the basics, of course. But in November, timing also becomes more crucial.
The November IPO market differs slightly from the rest of the year. Most of November’s IPO traffic is packed into the month’s first three weeks, and then comes Thanksgiving’s holiday-shortened week. You might see a few deals trickle into the market after the Thanksgiving break, but the major rush comes before Turkey Day.
Even though November is basically a three-week month, history shows it has been one of the busier months of the year for the IPO market. During the Novembers running from 1970 (with seven IPOs priced) through 2003 (with 17 IPOs priced), bankers have priced 1,070 IPOs over that 34-year span, according to available records. That put November’s production at 9.3 percent of the total traffic, which added up to 11,492 IPOs that bankers priced from January 2, 1970, though December 31, 2003. It works out like this: An “average” November has produced 31.5 IPOs, above the 28.2 IPOs priced during an “average” month the rest of the year.
In terms of deals, the most active November was in 1993, when bankers priced 100 IPOs. Surprised? Maybe you thought more companies went public in November 1999 and November 2000 during the “insanity dot-com” era than in any other November. Wrong. In November 1999, bankers priced 59 IPOs (above average) and in November 2000, bankers priced 22 IPOs (below average).
The slowest November was in 1974, when no IPOs were priced.
In terms of dollars, the busiest November was 1999, when bankers raised $33.9 billion. Four blockbuster IPOs in November 1999, each worth over $1 billion, helped drive up the month’s e-dollar amount. None was a dot-com. They were:
· Enel Societa per Azione, an Italian public utility, raised $16.5 billion when it priced 363.8 million American Depositary Shares (ADS) at $45.23 each on November 2, 1999. The stock recently sold at $46.70 per ADS, up 3.2 percent from its initial offering price. That was the largest IPO ever.
· Charter Communications, St. Louis, a broadband communications company, raised $3.23 billion when it priced 170 million shares at $19 each on November 9, 1999. The stock recently sold at $2.65 per share, down 86.1 percent from its initial offering price.
· United Parcel Service, Atlanta, the letter and package delivery behemoth, raised $5.47 billion when it priced 72 million shares at $50 each on November 10, 1999. The stock recently sold at $81.50 per share, up 63 percent from its initial offering price.
· Agilent Technologies, Palo Alto, California, a provider of solutions to the communications, electronics, life sciences, and chemical analysis industries, raised $2.16 billion when it priced 72 million shares at $30 each on November 18, 1999. The stock recently sold at $25 per share, down 16.7 percent from its initial offering price.
Each of these deals was priced before the Thanksgiving Day holiday.
On November’s IPO platter
This year’s November IPO calendar looks a little lighter than the “average” November. The U.S. presidential election took away the month’s first week. Thanksgiving will take away another week. Bankers squeezed out a few deals last week, and November’s traffic is starting to build.
For the week of November 8, the IPO calendar lists six deals expected to raise about $2.3 billion. For the week of November 15, the calendar lists eight IPOs expected to raise about $670 million. Some bankers have confided they are hoping to get their deals priced before Thanksgiving. If not, they’ll shoot for December.
Here is the rundown for the week:
- China Netcom Group plans to price 47.1 million ADS at $20.24 to $23.12 each to raise $1 billion. The company will offer 42.3 million ADS and selling shareholders will offer 4.8 million ADS.
The shares are expected to trade on the New York Stock Exchange (NYSE) and on the Hong Kong Stock Exchange. The deal is to be priced November 9, and to start trading on the NYSE on November 16. The one-week lag will occur because this deal is driven by China’s securities regulations since it will be listed in both Hong Kong and New York.
China Netcom Group is a Beijing-based fixed-line telecommunications company that offers telephone services, broadband, and other Internet-related services. It is also a business and data communications services operator in China. The company has about 100,000 employees.
The underwriters:China International Capital, Citigroup, and Goldman Sachs (Asia).
Venture capitalists: CNC Fund and Shanghai Alliance Investment Limited.
52-week percentage change:
Dow Jones Fixed Line Communications Index: up 11.1 percent.
Nasdaq Composite Index: up 2.39 percent.
- Copano Energy plans to price 5 million common units at $19 to $21 each to raise $100 million. The company plans a quarterly distribution of $0.40 per common unit, or $1.60 per common unit on an annual basis. The IPO is to start trading on Tuesday, November 9.
Based in Houston, Copano Energy is a midstream energy company with networks of natural gas-gathering and intrastate transmission pipelines in the TexasGulfCoast region. The company’s natural gas pipeline assets consist of about 1,300 miles of gas-gathering and transmission pipelines. Copano Energy has about 80 employees.
The underwriters: RBC Capital Markets is the lead manager. Acting as co-managers are KeyBanc Capital Markets and Sanders Morris Harris.
Venture capitalists: Copano Partners, DLJ Merchant Banking Partners III, and EnCap Energy Capital Fund III.
52-week percentage change:
Dow Jones Energy Index: up 42.3 percent.
Nasdaq: up 2.39 percent.
- Ormat Technologies plans to price 6.25 million shares at $15 to $17 each to raise $100 million. The IPO is to start trading on Thursday, November 11.
Based in Sparks, Nevada, Ormat Technologies is a vertically integrated company engaged in the geothermal and recovered energy power business. The majority of Ormat’s senior management and all its production and manufacturing facilities are located in Yavne, Israel. Formed in 1994, Ormat Technologies has about 676 employees.
The underwriters:Lehman Brothers is lead manager. Acting as co-managers are Deutsche Bank, RBC Capital Markets, and Wells Fargo Securities.
Venture capitalists:Bronicki Investment, Bank Leumi, and Bank Hapoalim B.M.
52-week percentage change:
Dow Jones Electric Utilities Index: up 18.4 percent.
Nasdaq: up 2.39 percent.
- Nalco plans to price 44.4 million shares at $17 to $19 each to raise $800 million. The IPO is to start trading on Thursday, November 11.
Based in Naperville, Illinois, Nalco is a global provider of integrated water treatment and process improvement services, chemicals, and equipment programs for industrial and institutional applications. Formed in 2004, Nalco has about 10,500 employees.
The underwriters: Goldman Sachs and Citigroup are co-lead managers. Acting as co-managers are JPMorgan, UBS Investment Bank, Banc of America Securities, Bear, Stearns, Credit Suisse First Boston, Deutsche Bank Securities, Lehman Brothers, and William Blair & Co.
Venture capitalists:The Blackstone Group, Apollo Management, and GS Capital Partners.
52-week percentage change:
Dow Jones Chemicals, Specialty Index: up 18.3 percent.
Nasdaq: up 2.39 percent.
- Specialty Underwriter Allianceplans to price 20 million shares at $10 to $12 each to raise $220 million. The IPO is to start trading on Thursday, November 11.
Based in Houston, Specialty Underwriter Alliance is a recently formed company with no operating history. Specialty Underwriter intends to engage in specialty program commercial property and casualty insurance to serve niche groups of insured clients. Formed in 2003, Specialty Underwriter Alliance will have about 10 to 20 employees.
The underwriters: Friedman Billings Ramsey is the lead manager. Acting as co-managers are William Blair and Cochran, Caronia & Co.
Venture capitalists: Friedman, Billings, Ramsey Group and Standard American Insurance Limited.
52-week percentage change:
Dow Jones Insurance, Property & Casualty Index: up 5.9 percent.
Nasdaq: up 2.39 percent.
- ZipRealty plans to price 4.55 million shares at $10 to $12 each to raise $50.5 million. The IPO is to start trading on Wednesday, November 17.
Based in Emeryville, California, ZipRealty is a full-service residential real estate brokerage firm operating in 12 major metropolitan areas with over 750 sales agents. The company uses the Internet, proprietary technology, and business processes to serve home buyers and sellers. Formed in 1999, ZipRealty has about 919 employees.
The underwriters: UBS Investment Bank and Deutsche Bank are co-lead managers. Acting as co-managers are Thomas Weisel Partners and Pacific Growth Equities.
Venture capitalists: Benchmark Capital Partners, Pyramid Technology Ventures, Vanguard Ventures, Venture Strategy Partners, Lamoreaux Partners, Iverson Financial, and Barrington Partners.
52-week percentage change:
Dow Jones Real Estate Index: up 22.2 percent.
Nasdaq: up 2.39 percent.
Reading the IPO menu
At press time, none of the above was on anybody’s “most-wanted” list. If the deals are priced right and the stock market’s tone remains favorable, a few could do better than expected in the aftermarket. Nevertheless, there are no Googles or Shopping.coms to spice up this week’s calendar.
But don’t go away. As any savvy IPO investor knows, opportunity sometimes knocks where it’s least expected.