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Agere biggest 1Q IPO
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March 31, 2001: 7:00 a.m. ET
Morgan beats out Goldman for top 1Q underwriter but only 19 deals priced
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - The go-go IPO market got stuck in a slow dance during the first quarter of 2001, and with only one offering on tap this week, analysts are now wondering how bad it can get for the full year.
Broad market volatility continued to hamper new issues in the year's first quarter, practically shutting the door on companies hoping to tap the equity markets.
On Friday, the Nasdaq Composite, a barometer for IPOs, staged a modest rally, rising 19.69, or 1.08 percent, to close at 1,840.26. But so far this year, the Nasdaq has fallen nearly 26 percent.
"The health of the Nasdaq is the basis for the IPO market," said Corey Ostman, co-CEO of Alert-IPO.com. "Quarter after quarter we've had really bad earnings. When we get out of that we will see the Nasdaq stabilize."
Only 19 IPOs managed to price their deals in the first quarter, raising $8.7 billion, the slowest time period since the fourth quarter 1990, when a mere 13 offerings priced, raising $131 million. The first quarter's totals represent a 75 percent drop from last year when 141 deals raised $35.2 billion.
The results also show a drastic decline compared to the fourth quarter, which is typically the strongest time for IPOs. Last quarter, 90 IPOs went public, raising $25 billion.
Companies launching IPOs have shifted their focus away from the once-lucrative U.S. markets. Of the 188 total offerings in the first quarter, which raised $52.6 billion globally, more than half came from non-U.S. companies that chose not to offer any part of their deals to the U.S. markets. Last year, of the 420 total offerings, two-thirds were marketed in the United States.
Only one company, Select Medical Corp., an operator of acute care hospitals, is braving the tough IPO waters this week. Mechanicsburg, Pa.-based Select Medical plans to sell 12.5 million shares at $11 to $13 each via lead underwriter Merrill Lynch. The company plans to trade under the Nasdaq symbol "SLMC."
"Underwriters are very careful now in how they bring their deals out," Ostman said. "They're just waiting for the opportunity to bring their deals forward."
Top IPO
The IPO market's decline has allowed non-technology companies to shine. In fact, two solid energy firms earned the title as the quarter's hottest deals.
Houston-based Oil States International, which provides specialty products and services to oil and gas production companies, rose a mere 15 cents in its debut. However, Oil States (OIS: Research, Estimates) has since gained about 28 percent from its $9 offer price, and is trading at $11.50.
Tulsa, Okla.-based Williams Energy Partners LP also made a good showing but because it is a unit deal, the offering was not followed by many IPO analysts and accounted for in current data. Williams Energy (WEG: Research, Estimates) operates and acquires a diversified portfolio of energy assets and mainly distributes refined petroleum and ammonia.
On February 6, the IPO rose $2.50 to $24 in its debut and has since increased nearly 40 percent from its $21.50 IPO price, trading at near $30.
Morgan rules
Morgan Stanley Dean Witter, which served as lead underwriter on the huge $3.6 billion IPO from Agere Systems Inc., retained its top spot this quarter, serving as lead book runner on four IPOs, including foreign offerings trading in the U.S., raising $6.1 billion. Last quarter, Morgan was lead underwriter on 13 deals, which raised $6.9 billion.
 Goldman Sachs, last year's top underwriter with 15 deals, fell to fifth place, serving as lead underwriters on just three IPOs, including the much anticipated offering from LoudCloud Inc. (LDCL: Research, Estimates), which raised $369 million. Goldman ranked second in the fourth quarter, with 11 deals that raised $5 billion.
Credit Suisse First Boston made its appearance because it served as co-lead on one deal, the offering from CNOOC Ltd. State-owned China National Offshore Oil Corp., or CNOOC (CEO: Research, Estimates), is a Chinese energy company that raised $1.3 billion in February.
As expected, Agere Systems weighed in as the biggest IPO in the first quarter, raising a hefty $3.6 billion, the most since AT&T Wireless's (AWE: Research, Estimates) $10.6 billion IPO in April 2000.
On tap
So far in the first quarter, 83 companies have withdrawn their planned IPOs, that could have raised about $8.7 billion. The totals are much higher than last year, when only 19 companies pulled their IPO plans in the first quarter, that expected to raise $1.3 billion. However, this quarter's results are below the fourth quarter's, when 96 firms pulled their offering, which were expected to raise $14.4 billion.
But companies are still looking to tap the equities markets with 33 filing with Securities and Exchange Commission to go public, according to data from CommScan, a New York-based investment banking research firm.
But any chance of a rebound probably won't come until the second half, provided the Nasdaq regains some ground, analysts said.
"We would expect the IPO calendar to start perking up in six months time, during the second half," said analyst Steve Tuen, of IPO Value Monitor. "But it really does depends on how well the broader market does."
Boon for retail investors
There is a silver lining amid all the bad news, said John Fitzgibbon, editor of WFNusa.com.
When IPOs were hot, individual investors were often shut out of strong IPOs, such as VA Linux Systems (LNUX: Research, Estimates), which gained nearly 700 percent in its December 1999 debut. Access to such moonshots was often available only to Wall Street.
The boon times for the IPO market often featured highly speculative technologies companies, saddled with high losses and little else. These offerings often surged into triple digit territory, making them too pricey for the individual investors.
Now reality has set, bringing valuations down as well as prices, and giving retail investors a shot at IPOs, Fitzgibbon said.
"What is being offered now on the IPO calendar are solid companies, companies of substance," Fitzgibbon said. "And no one will be running down the Street to buy these. The individual investor has a much better time at IPOs now than in past years."
Investors can now buy into strong companies such as KPMG Consulting Inc., a spinoff from global accounting firm KPMG LLP, which provides Internet consulting to Fortune 1000 firms. The KPMG (KCIN: Research, Estimates) IPO surged 30 percent in its first day, but has since fallen below its $18 IPO price and is trading at around $13.
"Even if can't get in on the offer price you won't have to pay a huge premium now," Fitzgibbon said. 
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