The first week in August was unkind to initial public offerings, leaving behind a trail of delayed deals and word Google Inc, the year's most highly anticipated IPO, will not hold its offering as soon as expected.
While IPOs hit snags and debate persisted as to whether Google can successfully pull off its auction IPO, the door has not completely shut on the line of pending offerings.
The initial public offering of Navteq Corp raised $880 million after more shares than expected were priced near the high end of the estimated range. The shares of the digital mapping technology provider, a unit of Philips Consumer Electronic Services, rose in their market debut on Friday.
"There is capital out there to put to work for the right story," said Lisa Carnoy, co-head of equity capital markets for the Americas, at Merrill Lynch & Co Inc, which underwrote the offering.
Despite the difficult market conditions, the deal was able to succeed because of the company's strong fundamentals and management, she said. "The market has become very selective and investors want companies that are profitable - and not some sort of adjusted, pro forma profitability, but net GAAP earnings per share," Carnoy said. That aversion to risk was illustrated this past week when Nanosys Inc, which was billed as a "coming-out party" for the fledgling nanotechnolgy industry, withdrew its highly anticipated IPO due to "adverse market conditions."
Some of the IPO market's difficulty can be tied to broader US equity market conditions. In the past week, the US equity markets have been pressured by fears about rising oil prices and worries about the strength of the US economy.
"People just don't want to own stocks," said Doug Baird, co-head of US equity capital markets at Deutsche Bank Securities. "It's almost a perfect storm of reasons to not buy an IPO."
Buying into IPOs, which typically requires investors to place a bet on young companies with unproven track records, becomes less appetising as equity markets fizzle. "If people are feeling less bullish about established companies, they're certainly going to be less willing to take a risk on an IPO company," said Pat Rondeau, a partner with Wilmer Cutler Pickering Hale and Dorr LLP.
Debate continues as to whether this focus on fundamentals will play into Google's IPO, which could value the company at more than $36 billion.
Many financial advisors are steering their clients away from the IPO, saying that, at its estimated price of $108 to $135 per share, Microsoft Corp is a more attractive investment. Institutional investors are also wary of the deal, with some saying it is not an attractive investment target until its shares are priced well below $100.
But many agree the offering is appealing to technology fans and Google supporters who want to have a piece of the action.
"It'll probably do just fine," said Anthony Ogorek, a CFP who runs Ogorek Wealth Management LLC in Buffalo, New York, of the IPO. "Look at how many people buy lottery tickets."
Either way, next week's deals can now slip in ahead of the Google offering.
IPOs scheduled for next week include Archipelago Holdings Inc, the electronic stock market that has filed for a $156 million offering; Cohen & Steers Inc., a New York-based mutual fund management company that has filed for a $105 million offering; and Polypore International Inc., a developer of polymer-based membranes, that is slated for a $300 million offering.