Companies go public at slowest pace since 1977

Only six IPOs completed in third quarter, all in July

October 07, 2002|By BLOOMBERG NEWS

NEW YORK - U.S. companies are going public at the slowest pace in 25 years.

Only six companies completed initial public offerings in the third quarter, including CIT Group Inc.

Dozens more canceled sales as slumping stock markets sapped demand and kept offerings to their fewest since 1977, according to Jay R. Ritter, a University of Florida finance professor who tracks initial public offerings.

"There are very few people working who ever had opportunity to see a market quite as challenging as we're in right now," said Larry Wieseneck, head of U.S. equity capital markets at Lehman Brothers Holdings Inc.

Lehman ranked second for the quarter behind Goldman, Sachs & Co. after they jointly managed CIT's $4.9 billion sale, the largest of the year.

A two-year slump in initial stock offerings, which can generate fees as high as 7 percent, in part triggered the biggest round of Wall Street layoffs since the late 1970s and caused FleetBoston Financial Corp. to close its Robertson Stephens Inc. investment bank.

The bank catered mainly to computer-related companies that went public in record numbers in 1999 and 2000.

As the Nasdaq composite index slumped 15 percent in the quarter, falling in 10 of the 13 weeks, more than a dozen companies abandoned IPO plans at the last minute.

Merck & Co. tried several times to complete the $1 billion offering of its Medco Health Solutions Inc. unit before canceling the IPO in July.

LipoScience Inc. scrapped its $80 million offering after two attempts.

Others with tentative IPO plans delayed them until the fourth quarter. Those that did go public sold their shares for less than they anticipated.

CIT sliced its offering by a third before finding willing buyers. Kirkland's Inc., a retailer of home decorating items, also raised a third less than planned.

Proceeds raised in IPOs have slumped by a third. In the third quarter last year, 15 companies went public. In 2000, 138 went public in the quarter, according to Dealogic LLC.

Those companies that did make IPOs in the third quarter all went public in July. August and September were shutouts, the first two-month stretch without an IPO since 1974.

The immediate outlook remains bleak for many companies planning IPOs.

"This has been a tough quarter across Wall Street for equity issuance and we do not expect a dramatic turnaround soon," said Stuart N. Bernstein, who jointly heads Goldman Sachs Group Inc.'s equity capital markets for the Americas.

Still, Bernstein expects that several high-quality common stock and convertible offerings will be priced by year's end.

Goldman reportedly is rescheduling Platinum Underwriters Holdings Ltd., the reinsurance unit of St. Paul Cos. that scrapped a $920 million offering in July.

Merrill Lynch & Co. Inc. and Goldman are planning to take Dick's Sporting Goods Inc. public in mid-October.

Cinema chains Loews Cineplex Entertainment Corp. and Cinemark also are scheduling sales.

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