In a relatively positive sign for embattled investment bankers and the depressed equities market, several companies sold shares in follow-on offerings Wednesday.
each got deals priced Wednesday morning while
( MVK) set plans to sell 5 million shares off a previously filed shelf registration.
The flurry of deals isn't enough to mark a turnaround in the underwriting business, but it does suggest a certain confidence in the equities market, analysts said. After declining for almost eight straight weeks, stocks have been rallying since Friday.
"Market conditions have improved, that's a window of opportunity. If the market had been dropping 100 points a day, those deals wouldn't have been priced," said Rich Peterson of Thomson Financial, which tracks equity underwriting deals.
So far, May's pace for follow-on deals is in line with last month's, said Peterson, good news for investment banks, which have really had to scrounge for underwriting business in the past two years.
While good for the overall market, the deals are still a mixed bag for investors already in the stock. Follow-on offerings land the companies issuing them more cash and might indicate an underwriter's belief in the company's business prospects. But they dilute existing ownership and usually lead to reflexive selling, at least at first.
Investors apparently liked U.S. Steel's deal. The company priced 9.5 million shares at $18.50 apiece and the shares were recently changing hands at $19.16. Masco reportedly did 9 million shares at $26.50 each, slightly below last night's $27.02 close, although the shares were recently about 45 cents above the offering price after the company raised its earnings guidance. SonoSite sold 2.7 million shares at $17.25 and recently fell to $17.11.
Maverick was losing 6.3% to $15.
So far this year there has been a greater number of follow-on deals than during the same period last year, but less capital has been raised. U.S. registered follow-ons number 237 to date, for a total of $30.6 billion, compared to 119 offerings in the same period last year, which raised $31.1 billion, said John Brand, equities analyst for Dealogic.
Computers and electronics have far outpaced other sectors this year in number and dollar volume of follow-on deals, with 39 deals and $4 billion raised. Last year, telecom led in dollar volume with 11 deals and $9 billion, while health care led in activity with 19 deals and $2.5 billion.
"From what we've seen it's premature to suggest it's a solid sign of an upturn," said Mark Johnson, chair of the underwriting practice group at firm Hale & Dorr, which does its own underwriting. "But there is an increasing ability to get follow-ons done."