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Kraft melts 2Q IPO rivals
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June 30, 2001: 7:00 a.m. ET
CSFB emerges as top underwriter, Simplex best debut, Kraft biggest IPO
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - The go-go IPO market continued to crawl in the second quarter but Kraft Food Inc.'s mammoth $8.7 billion offering helped give a tasty pop to new issues.
The second quarter showed signs of life with more companies tapping the equity markets than in the first. Excluding unit deals, 29 companies launched IPOs raising $19.4 billion, a 52 percent jump over last quarter's 19 issues that brought in $9.2 billion.
Second quarter performance is still a shadow of last year's heyday when 100 IPOs raised $33.7 billion, according to data from CommScan.
Analysts credited Kraft Foods (KFT: up $0.59 to $31.00, Research, Estimates) for much of second quarter's improvement. Without it, the amount raised in the second quarter would be nearly the same as the first.
"Second quarter was forgettable," said John Fitzgibbon, of IPO Desktop.
There was a glimmer of light. At the beginning of the year, when the broad market dropped and investors left the technology sector, droves of firms pulled their planned offerings. A total of 84 companies withdrew in first quarter, forfeiting $8.2 billion.
But the gloom tapered off in second quarter when only 38 companies pulled their planned issues.
However, the go-go IPO market of 1999 and early 2000 looks like it will remain a memory. Only 23 companies filed in the second quarter to go public—less than the first quarter—and are expected to raise $11.3 billion.
The totals are a significant drop from last year when 212 firms filed for IPOs. More importantly, first quarter saw 35 companies register for offerings, according to data from CommScan.
"It's troubling in the long term because we saw the number of filings decrease in second quarter versus first quarter," said Corey Ostman, co-CEO of Alert-IPO.com.
New issues came in at a scant rate in the second quarter when often only three to four IPOs would go public each week. The slowdown will probably continue for the rest of 2001, analysts said.
But the slower market produced stronger IPOs this quarter, said Joe Hammer, head of capital markets, at Adams, Harkness & Hill.
"We've got a decent tone to the market and a select number of quality deals are getting out," Hammer said. "Everyone is being careful about the quality of offerings being scheduled."
The big cheeses
Kraft Foods, the year's most anticipated offering, easily melted away the competition to earn the title as biggest second-quarter IPO --and largest issue so far this year--raising $8.7 billion.
The second quarter also saw other big names launch IPOs. Instinet Group Inc. (INET: up $1.24 to $18.64, Research, Estimates), an electronic stock market operator, went public in May, rising 22 percent. Peabody Energy Corp. (BTU: up $3.75 to $32.75, Research, Estimates), one of the world's largest coal companies, took advantage of the current energy crisis and launched its IPO, also in May, rising 31 percent.
The Kraft issue was enough to vault the food and beverage group to first place among the sectors. With only Kraft, food and beverage raised more than any other sector. Energy offered the most IPOs with seven deals raising $6.65 billion. Technology came in second with five issues raising $884 million.
The fiber optic sector led the rally of the go-go IPO market of 1999 and early 2000. However, no sector has stepped forward to lead the market this year, analysts said.
Gone also are the skyrocket gains of 1999 when offerings would typically double or triple on their first day. Now, a modest 10 to 20 percent rise is considered strong.
"This is a return to conventional premiums that historically are part of the IPO market," Hammer said. "We are back to more normal premiums."
CSFB on top
Credit Suisse First Boston, the banking unit of Credit Suisse Group, beat out A-list rivals Goldman Sachs and Morgan Stanley to gain the top underwriter spot in the second quarter.
Always a technology powerhouse, CSFB served as lead book runner on seven IPOs, including the Kraft IPO, and raised $5.4 billion. CSFB currently is the subject of a federal investigation that alleges the bank requires big investors to pony up large commissions in exchange for access to IPOs.
Salomon Smith Barney, which served as co-lead on Kraft, placed second with four IPOs, tipping the scales at $4.8 billion. Salomon didn't even make the top five last quarter.
Morgan Stanley, which earned the top spot in first quarter, fell to fourth with three deals raising $2.4 billion. Goldman Sachs, which came in fifth last time, inched up to third place with four deals raising $3.1 billion.
Best first day
Absent for much of the year, technology deals triumphed in second quarter. Simplex Solutions Inc., a provider of verification software, turned in the best debut when it surged 77 percent in May. Simplex (SPLX: up $0.27 to $23.70, Research, Estimates) also emerged as aftermarket champ with shares doubling from its $12 IPO price.
Chip developer Multilink Technology Corp. also climbed 24 percent last week and have since surged 60 percent.
Princeton Review Inc. failed to pass the test when it produced the worst first day performance, according to IPO.com. Princeton Review (REVU: down $0.15 to $8.60, Research, Estimates), a provider of test preparation services, fell nearly 14 percent when it began trading mid-June. 
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