The second quarter of 2002 saw a mild upturn in the IPO market, with 33 IPOs producing gross proceeds of $6.18 billion for YTD totals of 50 IPOs and gross proceeds of $15.51 billion. In comparison, the second quarter of 2001 produced 29 offerings with gross proceeds of $17.86 billion and the first half of 2001 had 49 IPOs with gross proceeds of $26.07 billion, of which $11.5 billion came from just two IPOs (Kraft Foods and Statoil).
The accounting, corporate mismanagement and insider trading scandals that have unfolded over the past eight months have further eroded investor confidence in already weak markets. Coupled with continued earnings warnings from the technology sector and no bounce in information technology spending on the horizon, the IPO market has continued to struggle as broad market indices have sagged. Through June 30, the Dow has shed 8% this year while the Nasdaq has declined by 25%, and these trends have continued into July.
The accounting, corporate mismanagement and insider trading scandals that have unfolded over the past eight months have further eroded investor confidence in already weak markets. Coupled with continued earnings warnings from the technology sector and no bounce in information technology spending on the horizon, the IPO market has continued to struggle as broad market indices have sagged. Through June 30, the Dow has shed 8% this year while the Nasdaq has declined by 25%, and these trends have continued into July.
Aftermarket performance mirrored the unfavorable broader market conditions. Although eight second quarter IPOs gained over 25% by quarter end, 13 others ended the quarter below their offer price and the average second quarter IPO fell 6% from its first day close by quarter end. The average first quarter IPO, while still holding a 12% gain over its offer price, fell 3% during the second quarter.
The top performing IPOs of the second quarter were JetBlue Airways (up 69% from offer price by quarter end) and retailer Aeropostale (up 52%). IPOs by government and defense contractors were also well received in the second quarter. IT solutions provider SRA International and national security program provider Veridian increased by 50% and 42% at quarter end, respectively.
Looking to the second half of 2002, broad market recovery and reduced volatility - and restoration of investor confidence - are likely to be prerequisites to expansion of the IPO market much beyond big name, well-established companies.
David A. Westenberg
Senior Partner
Senior Partner
[email protected]
Tim Gallagher
Financial Analyst
Financial Analyst
[email protected]
Notes on Data: Hale and Dorr LLP compiled all data in this review unless otherwise noted. Offerings by REITs, bank conversions and closed-end investment trusts are excluded. Offering proceeds exclude proceeds from the exercise of underwriters' over-allotment options, if applicable. The data is collected from various sources, including Global Securities Information, IPO.com, IPOCentral.com, Renaissance Capital (www.IPOhome.com) and SEC filings.
