Analysts say IPO success will continue in 2000


Internet, biotechnology are businesses to watch

January 09, 2000|By Mara H. Gottfried

THE INITIAL public offering market had its best year ever in 1999, raising a record $69.2 billion, according to Thomson Financial Securities Data. That accounts for almost 20 percent of the total raised since 1989, and while the total number of deals was down, the dollar amount was far and away the highest. The next highest was $49.9 billion raised in 1996.

What is the forecast for 2000? Will investors still snap up hot new issues? Will Internet stocks continue to generate a frenzy? What about other types of companies?

Randall Roth

Senior analyst at Renaissance Capital, a Greenwich, Conn., firm that follows the IPO market.

I think the prognostication looks pretty optimistic for IPOs. It's been good in just about every Internet IPO, but it doesn't mean that it's going to continue that way. There will be a saturation point.

I think we're moving onto new frontiers -- business to business, broadband Internet companies, new software companies. One thing people haven't really thought of yet, but we're moving toward it, is mobile Internet. We'll see it first in Japan and Europe and it will soon migrate over here.

People will probably continue snapping up IPOs if there aren't shocks to the economy. We expect to see some rough spots, but overall, the prognosis is pretty good for next year. Probably the one thing that can be guarded against is the derivative companies, companies that jumped on the bandwagon.

Steve Lacey

Managing editor of IPO Reporter in New York

It's going to be difficult to top what we did in 1999, but I certainly think it's possible. There's quite a few companies that are looking to go public after the Christmas results. Some categories to look for would be home-furnishing companies.

If you're looking for a sector just beyond Internet and telecommunications, I think biotech might be something to keep an eye on. Insurance companies could prove to be big, too.

I think Palm OS and the fact that they're licensing the technology is huge. You could see the flow of information from the PC to the mobile, wireless, hand-held device. That could be a big theme in 2000.

There's clearly been a mountain of capital put into companies. That indicates the supply is there; the question is whether demand will hold.

Doug Baird

Co-head of U.S. equity capital markets for Deutsche Banc Alex. Brown, an investment banking and brokerage firm in Baltimore

I would say 2000 will start at the same new-issue pace that 1999 ended.

Many companies purposely delayed their IPOs because of concerns over Y2K. The backlog of deals is going to be pretty big.

An interesting question will be, as underwriters are becoming increasingly aggressive in pricing IPOs, will that start to erode investors' interests in buying the next deal? People have made an enormous amount of money investing in IPOs. If they continue to make money, they'll continue to snap them up next year.

I think most people are of the view that the Internet is very much in its infancy as a medium for business. There's every reason to expect a flurry of offerings around the Internet.

The interesting question here is what about "me too" companies, which are mostly repeating business models rather than pioneers in the market. Another area we are noticing a renewed interest in is biotechnology companies.

Philip Facchina

Managing director and head of technology investment banking for Friedman, Billings, Ramsey & Co., an institutional brokerage, investment banking and research firm in Arlington, Va.

First of all, the Nasdaq hit probably 60 record highs [last] year alone. What that means is there's a tremendous amount of demand. Fundamentally, even within technology, the market is particularly aggressive as it relates to Internet stocks.

If you look at what's in the IPO pipeline already, the first quarter will be very strong. There will be a number of new companies and we expect them to be well received. Many of them are in the business-to-business market. If you look further in the year, it's harder to forecast.

I think investors will continue to try to separate the winners from the losers early. They have demonstrated that they pay premiums for companies that will be market leaders.

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