AT&T Set to Launch Record IPO

Its proposed ticker symbol, AWE, is exactly what it is, inspiring among institutional investors and media coverage.

But contrary to what some financial commentators have been saying, the widely awaited initial public offering of AT&T's (T) wireless tracking stock is not necessarily a barometer of the ailing IPO market.

AT&T Wireless, home to the Digital One Rate plan, is expected to start trading on Thursday after a strong round of institutional demand, becoming the largest U.S. IPO ever.

By Wednesday, the wireless tracking stock was oversubscribed by a 2- to-1 ratio in the price range of $26 to $32, meaning there were twice as many buyers in that range as the 360 million shares being offered. The shares were priced at $29.50 after the market had closed on Wednesday.

The offering could bring in $11.5 billion if it sells at the top end of the range, double United Parcel Services' huge purse of $5.47 billion in its IPO last November.

Darby Mullany, a reporter on CNBC, said "All eyes are on the tracking stock, which some say could make or break the beleaguered IPO market." CNBC established a chat room devoted to whether AT&T Wireless can revive the IPO market.

Art Hogan, a market strategist with Jeffries & Co., told CBS MarketWatch Wednesday, "It's amazing that in these troubled times in the IPO market, that the largest deal in history is more than 2-to-1 oversubscribed."

Standard & Poor's analyst Mark Basham even put out a rare pre-IPO buy rating on the stock with the target price of $34.50, a hurdle the stock should easily clear in its first breath as a public issue.

True, the demand and hype behind AT&T's tracking stock seems on the surface to be inconsistent with the enduring weakness in the underlying IPO market and the undercurrent of the Nasdaq market.

In April alone, 10 companies have withdrawn from the IPO process and dozens more have postponed their arrivals as the Nasdaq market swings wildly about. The five companies that did get priced after the April 14 Nasdaq plunge received a cool reception from investors last Thursday.

"AT&T Wireless is not going to be reflective of the overall IPO market," said Rob Norcross, vice president of Mercer, a management consulting firm. "This is a fundamentally a different animal. It's a market leader in wireless with a relationship with the leader in telecommunications; real assets and real cash. To compare this with smaller companies with no earnings and no experience, is ludicrous."

Only because AT&T Wireless is not the typical IPO with huge losses and no track record, is why the offspring of AT&T, worth $161 billion in market capitalization, can afford to come public in such a turbulent market.

AT&T is not worried about timing the market for large returns, Norcross said. Rather, he said, the company is going to the market because of the need to reposition itself in the new telecommunications environment. The only future IPOs that could feel a ripple from AT&T's debut, Norcross added, are the wireless assets from Bell Atlantic(BEL) and SBC Communications(SBC).

David Menlow, president of IPOfinancial.com, said that any parallel between AT&T wireless and the IPO market is unfounded. "It is a totally de-coupled situation. [AT&T Wireless] is an institutional sweetheart and will be around for five years. Institutions can buy it and sleep at night."

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