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Did Kraft kill IPO market?
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June 16, 2001: 7:00 a.m. ET
Five new issues attempt to go public after poor showing from Kraft
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - Hopes are modest for the handful of companies that will attempt to launch their initial public offerings this week, following the dismal performance of Kraft Foods Inc.'s IPO, the year's most anticipated offering.
Kraft, also the year's biggest IPO, added a quarter in its market debut last week but dropped below its $31 offer price thereafter. Shares managed to rebound Friday yet still never to touched their IPO high-water mark.
New issues had staged a rebound up until the vaunted big cheese company went public. But Kraft's dismal performance has cast a pall on offerings, said John Fitzgibbon, editor of Gaskins IPO Desktop.
"Investors are going to turn skittish again," he said. "Individual investors got stock in Kraft and they got burned."
A report from Goldman Sachs, who was not part of Kraft's 71 firm syndicate, added further gloom by saying that Kraft (KFT: down $0.28 to $30.32, Research, Estimates) shares were only worth $25.
However, other analysts are laying the blame on the plunging broader market. An earnings warning from Nortel Networks Corp., which plans to cut another 10,000 jobs and expects a second-quarter loss of $19.2 billion, sent shock waves Friday. Nortel's (NT: down $1.34 to $8.52, Research, Estimates) announcement followed one by JDS Uniphase Corp. (JDSU: down $1.84 to $10.60, Research, Estimates) which lowered its financial targets for the current and upcoming quarters, citing continued weakness in telecommunications service provider spending.
The Nasdaq composite index, a barometer for IPOs, finished lower Friday by 15.64 points at 2,028.43, its lowest close since April 24. The Dow industrials also lost 66.49 to 10,623.64. It was the Dow's worst finish since April 24 and the Nasdaq's worst of the year. The S&P 500 declined 5.51 to 1,214.36.
"The broader markets are tanking," said market analyst Kyle Huske, of IPO.com.
A handful of IPOs
Five IPOs will attempt to go public this week, according to MCM CorporateWatch which tracks new issues.
The Phoenix Cos. Inc. is getting the highest marks from analysts. The demutualized firm offers life insurance plus annuity products and services through Phoenix Home Life Mutual Insurance Co.
Hartford, Conn.-based Phoenix also offers investment management services that target the affluent and high net worth market. Phoenix products are sold through advisors and financial services firms.
Phoenix Home Life got approval earlier this month to change to a stock life insurance company. The demutualized insurer had $157.5 million in losses on $561.4 million in revenue for the quarter ended March 31.
Insurance firms, like John Hancock Financial Services Inc. (JHF: up $0.67 to $39.55, Research, Estimates) and Metlife Inc. (MET: up $0.20 to $30.10, Research, Estimates), have proved to be strong long-term plays, Fitzgibbon said.
"Financial services offerings have done well this year," IPO.com's Huske added.
Phoenix plans to offer 48.8 million shares, down from 62.5 million shares filed earlier this month, at $14.50-to-$17 each, up from $9-to-$16 range, via lead underwriters Morgan Stanley and Merrill Lynch.
Phoenix is expected to price Tuesday and trade Wednesday under the New York Stock Exchange symbol "PNX."
Safe or interesting
Norway-based Statoil ASA, an integrated oil and gas company, is the safest IPO this week, analysts said. Statoil is the leading producer of crude oil and gas in the Norwegian Continental Shelf.
The company had oil reserves of 1.994 million barrels last year. Statoil reported profit before taxes of 38.1 billion kroner (US$4.2 billion) while net income came to 11.3 billion kroner (US$1.3 billion) in 2000, the company said.
Statoil plans to offer 383.2 million American depositary shares at $7.17-to-$8.25 each via lead underwriters Morgan Stanley and UBS Warburg. The company is expected to price this weekend and trade Monday under the NYSE symbol "STL."
While not safe, the offering from Princeton Review Inc. will prove to be the most intriguing.
Princeton provides preparation services to help students raise their test scores on such exams as the SAT, LSAT and the GMAT. Princeton's major competition comes from rival Kaplan Inc.
"Considering the economy, a lot of people are doing mid-career retraining," said Corey Ostman, co-CEO of Alert-IPO.com.
New York-based Princeton had $2.9 million in losses on $13.1 million in revenue for the quarter ended March 31. "They have good revenue growth but the bottom line is still red ink," said IPO Desktop's Fitzgibbon.
The test preparer plans to offer 5.4 million shares at $11 to $13 each via lead underwriter J.P. Morgan Chase.
Princeton plans to trade early this week under the Nasdaq symbol "REVU."
Is tech back?
Technology-related issues have been scarce in the IPO market this year. But the few that have come, Verisity Ltd. and Simplex Solutions Inc., have scored gains.
Simplex Solutions (SPLX: down $1.87 to $30.33, Research, Estimates), a provider of verification software, surged 77 percent in May, while Verisity (VRST: up $0.07 to $16.02, Research, Estimates) rose 20 percent in March.
Multilink Technology Corp. will brave the IPO waters this week. Multilink develops semiconductors and related devices for companies such as Alcatel (ALA: down $0.84 to $21.04, Research, Estimates), Nortel and JDS Uniphase.
The IPO will definitely feel the chill of the Nortel and JDS warnings, analysts said.
"Under normal circumstances, Multilink would be the one to watch," Ostman said. "But semiconductors got hammered last week."
Now the real test will be if Multilink actually goes through with its pricing or delays. The chip maker had $7.2 million in losses on $31 million in revenues for the March quarter.
Somerset, N.J.-based Multilink plans to offer 8 million shares at $8-to-$10 each via Credit Suisse First Boston.
Multilink plans to price Thursday for trade Friday under the Nasdaq symbol "MLTC."
Lastly, the IPO from TourJets Airline Corp. was expected last week but slipped to this week. TourJets offers vacations packages that include hotel rooms and non-stop airline service to vacation spots.
Since it was formed in April 2000, TourJets has yet to record revenue but had $811,015 in losses as of Jan. 31.
"TourJets will probably not get off the ground," Fitzgibbon, of IPO Desktop, said. "It's basically a startup and this is not the marketplace for it."
TourJets plans to offer 6.25 million shares at $12 each via lead underwriter J.W. Korth & Co. The company plans to trade under the Nasdaq symbol "TJET." 
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