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Three IPOs end slow 2Q
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June 23, 2001: 7:00 a.m. ET
Retailer, oil shipper, chip developer to tap IPO markets as quarter ends
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - Only three initial public offerings will attempt to go public this week in what is shaping up to be one of the slowest quarters in the last decade.
Preliminary totals indicate that the number of IPOs has fallen nearly 70 percent compared with last year. So far this quarter only 29 new issues, including unit deals, have gone public, raising $19.3 billion. Last year at this time, 104 IPOs raised $33.7 billion.
But the second-quarter activity was better than the first's, when 19 IPOs raised a meager $9.2 billion. The first quarter's dismal performance was the slowest time period since the fourth quarter of 1990, when a mere 13 offerings priced, raising $131 million, according to CommScan, a New York-based investment banking research firm.
While the second quarter did improve somewhat, last week was notable for the IPOs that failed in the aftermarket. Of the four new issues, only Multilink Technology Corp. scored any substantial gains.
Only three deals are on tap this week, according to data from MCM CorporateWatch, but analysts have only tepid hopes for the trio of offerings. No IPOs are expected during the week of July 4, due to the U.S. Independence Day holiday.
"It's slim pickings," said analyst Steve Tuen of IPO Value Monitor.
But the IPO market may get a boost from the Federal Reserve, which is expected to cut interest rates this week. "Any ray of sunshine that investors can find is a big plus for the IPO market," Tuen said.
Shipping oil
American Eagle Tankers Inc. Ltd. is considered the mostly likely IPO to score a premium and maintain it in the aftermarket. The company operates a fleet of 24 Aframaz tankers, which it uses to transport petroleum in the Atlantic basins.
American Eagle is the third recent company to come to market that ships oil by sea. Last week, General Maritime Corp. (GMR: up $0.10 to $13.65, Research, Estimates) dropped in its first day of trade, while Stelmar Shipping Ltd. (SJH: down $0.01 to $16.13, Research, Estimates) rose a meager 2 percent in March.
American Eagle is a unit of Neptune Orient Lines Ltd. (NOL), a provider of international shipping. After the offering, Singapore-based NOL will hold a 73.4 percent stake and plans to keep a majority holding in the company, American Eagle said in filing with the Securities and Exchange Commission.
American Eagle operates NOL's crude tanker business. Last year, the unit shipped about 463 million barrels of crude oil, of which 411 million were delivered to the United States, about 13 percent of total U.S. oil imports.
American Eagle is profitable, with $23.1 million in income on $73.6 million revenue for the March quarter.
"Revenues and profits are chugging right along," said John Fitzgibbon, of Gaskins IPO Desktop, who expects the IPO to rise by 50 cents to $1.
Jersey City, N.J.-based American Eagle plans to sell 6.75 million shares at $17.60-to-$19.50 each via lead underwriters Salomon Smith Barney.
The company plans to price Thursday and trade Friday under the New York Stock Exchange symbol "AEH."
A retailer?
Retailers have become rare occurrences in the IPO market but Galyan's Trading Co. Inc. hopes to go public. The retailer targets consumers with active lifestyles, selling a variety of outdoor and athletic equipment – from kayaks to racing bikes – as well as clothing, footwear and accessories.
The huge Galyan's stores, which can range from 80,000-to-100,000 square feet, usually feature a rock climbing wall to attract enthusiasts.
Galyan's touts strong sales growth. In 1996, the company had $108.2 million in sales which jumped to $421.7 million last year. But Galyan's posted $4.4 million in losses on $87.9 million in sales for the quarter ending May 5.
"They were profitable last year but are losing money again," said analyst Mike Falbo, of IPOpros.com. "But this could be due to development and build-outs."
In fiscal 2001, the company plans to open four new stores and seven more in 2002.
Plainfield, Ind.-based Galyan's operates 22 stores in 12 states, many of which are located in cold climates, such as New York and Indiana. Winter outerwear, rugged footwear and ski equipment represent about 14.6 percent of 2000 sales. The company cautioned in its SEC filing that abnormally warm weather could lead to lower profitability.
Galyan's could gain a small premium or up to $1 in its debut, Falbo said.
After the IPO, investment firm Freeman Spogli will hold a 33.3 percent stake, while the Limited Inc. (LTD: up $0.05 to $15.52, Research, Estimates) will have 29.7 percent.
Galyan's plans to sell 6.5 million shares at $18-to-$20 each via lead underwriters Goldman Sachs and Salomon Smith Barney. The retailer expects to price Tuesday for trade Wednesday under the Nasdaq symbol "GLYN."
A tech deal
Monolithic Systems Technology Inc. will attempt to follow the successful IPO of chip developer Multilink Technology Corp. (MLTC: down $0.09 to $11.10, Research, Estimates), which gained 24 percent last week.
Sunnyvale, Calif.-based Monolithic has developed patented chip memory technology that it calls 1T-SRAM, which combines high density and high speed with low power consumption and low cost. Until 1998, the company focused on selling memory chips but now licenses its technology to customers.
Cisco Systems Inc. (CSCO: down $0.16 to $17.52, Research, Estimates), Monolithic's biggest customer last year, accounted for 26.2 percent of company revenue in 2000 and nearly 21 percent of revenue in the March quarter. Celestica Inc. (CLS: up $1.14 to $44.14, Research, Estimates) comprised 16.9 percent of Monolithic's revenue for the March quarter while Delta Networks represented 10.6 percent.
Monolithic had $707,000 income on $4.6 million in revenue for the quarter ended March 31.
Monolithic plans to sell 5 million shares at $9-to-$11 each via A.G. Edwards & Sons Inc. and Needham & Co. Inc.
"This company has restructured," said IPO Desktop's Fitzgibbon. "Licensing memory seems to be going well for them."
Unfortunately, Monolithic is not using a top tier underwriter such as Morgan Stanley or Goldman to underwrite its deal. A.G. Edwards, which is not known for its strong investment banking arm, is lead bookrunner on the deal. The IPO could rise by as much as 50 cents, Fitzgibbon said.
"A.G. Edwards doesn't have the same institutional placement power that a Morgan or a Merrill does," he said.
Monolithic expects to price Wednesday to trade Thursday under the Nasdaq symbol "MOSY." 
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