Here's this week's crop of secondary and follow-on offerings, and I've got to tell you, the whole lot looks a bit soggy. Here are a couple of thoughts on buying secondaries:
When dealing with the bricks-and-mortar firms, you usually don't have to put in for these deals until the last minute. Often you can hold back until the morning of pricing. This gives you an advantage over your broker in that most times you can watch the stocks trade on
hours before they open for trading. Why do you care?
If you know where the deal was priced
you can watch it trade before taking down any stock, you have the equivalent of a crystal ball. If a deal is trading up, dial the phone and buy some stock. If the stock is down, put on your answering machine and go get coffee. Have fun.
Let's take a look at the offerings. (For an explanation of our ipoPros.com opinion, see the legend at the bottom of the table.)
- LOOKS GOOD -- This is the highest rating I assign to any follow-on deal. I expect these deals to produce a significant premium bid.
- LOOKS SHOT (i.e. it has a shot at performing well) -- The LOOKS-SHOT rating is a coin toss, usually decided by where the deal is priced relative to its previous close. Pricing at the previous closing price is likely to lessen any chance of a premium, while a significant discount tends to help a stock's chances of delivering a profit.
- LOOKS FLAT -- A LOOKS-FLAT rating is given to those deals where I feel a premium bid is unlikely, but downside to the stock's price is minimal. These deals are suitable candidates for what I call "payback" trades and "favors."
- LOOKS WEAK -- A LOOKS-WEAK rating is assigned to those follow-on deals where the stock's price has lost some ground and shows signs of getting worse. I feel that these deals carry a measure of risk, but if priced correctly, may work.
- LOOKS RISKY --This is the lowest rating I assign to any follow-on deal, and is usually given to those deals whose stock price has dropped significantly since the financing was announced. These deals bring with them unwarranted market risk.
Ben Holmes is the founder of
ipoPros.com, a Boulder, Colo.-based research boutique (now a wholly owned subsidiary of TheStreet.com) specializing in the analysis of equity syndicate offerings. This column is not meant as investment advice; it is instead meant to provide insight into the methods of new and secondary offerings. Neither Holmes nor his firm has entered indications of interest in any of the companies discussed in this column. Holmes' This Week in IPOs column appears Sundays, This Week's Secondaries appears Tuesdays, Upcoming Lockup Expirations appears Wednesdays and The Quiet Period appears on Fridays. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Holmes appreciates your feedback at