Window Nothin', This Is an IPO Door

MARKET SHARE Bob Starzynski

Window Nothin', This Is an IPO Door

One week you hear the initial public offering market is cooling off. The next week, it's heating up. What are you supposed to believe?

To set the record straight, the first five months of 1998 did not see as many IPOs as did the same stretch in 1997. However, the deals this year have been much larger.

According to information compiled by Securities Data Co. in Newark, N.J., there have been 196 IPOs this year, compared with 204 during the same period last year. But this year's offerings have raised $15.6 billion vs. $10.6 billion for the first five months of 1997. Boil it all down, and you have fewer deals yielding bigger dough.

Has the IPO market cooled off? No. Has it heated up? No.

What has happened is investors appear to have been more cavalier in the early months of this year. There is so much money to gobble up new offerings, but there are fewer companies going public. Those that can go public raise a lot more money than they could have a year ago.

Note: The top three IPOs this year - two financial funds and an investment services firm - raised $2 billion.

One interesting trend is that the big offerings have not been technology companies. Of course, tech companies see most of Wall Street's trading. Check out the most highly traded stock columns, and you'll see the usual suspects: Microsoft, Dell, Compaq, Intel, Motorola, AT&T, Lucent, Oracle and so on.

But the larger new arrivals to the public market are real estate investment trusts and investment houses. Of the top 20 IPOs this year, only three were technology related. Amkor Technology, which makes semiconductors, raised $308 million; Tristar Aerospace, a maker of aerospace hardware, brought in $180 million; and Ziff-Davis, which writes about technology, took home $319 million.

Much of the increased interest in the public market this year can be traced to a new spark of hope about Internet-related technologies. Just a few issues back, we looked at how companies like Yahoo! and America Online have bumped up their shares five-fold or more in the past year. But the largest Internet-related IPO this year was Verio, a Colorado-based service provider that raised $127 million. It was at No. 32 on the list. The Internet has driven the market, but the market is not driving the Internet.

One could say technology companies don't need the capital and are, therefore, not seeking it. That is way off base. Show me a technology company that doesn't need capital to support research and development of next-generation products, and I'll show you a company that is falling in the water with its feet stuck in concrete.

No, there must be a better explanation.

Look at those technology companies that are trading heavily and building their stock prices to astronomical highs. They all have a common thread - a track record.

Many tech companies, including a lot of those high on this year's list, need money before they have a track record. The public market will give them money but not without a bit of skepticism. Once they prove themselves, like America Online or Dell, they can get the big bucks.

With this idea, it's not surprising that the smallest IPO this year is a tech company. Ambient, a manufacturer of semiconductors, went public in February with a $4 million offering.

OK, so what's in store for the rest of 1998?According to Securities Data officials, July and October are typically the hottest months for IPOs. And there are already more than 100 deals in the pipeline that should go public by the end of this month, they estimate.

At that pace, 1998 should surpass last year's total of 634 issues that raised $44.1 billion. That is, if the proverbial IPO window doesn't close first.

For questions, comments and suggestions, contact Bob Starzynski via e-mail at

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