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Late Bloomers

A few of this year's IPOs have posted remarkable returns long after going public. Find out the reason why.

Here we are winding up the second quarter of 1999 -- half a year gone and it feels like it's just moving faster and faster every day. The end of a quarter is always a milestone for me and it gives me a good reason to pause and reflect on where the IPO market sits, where it has been and where I think it might be going over the next three months.

I spent some time this weekend looking back at my data for the first six months of the year. Picking out what I had done right or wrong was easy; the proof was in the pudding. But I discovered something remarkable about a short list of companies that I really liked, but that failed to deliver the kind of short-term excitement that has come to define today's IPO market.

Understand that, taken as a whole, these are not exciting businesses. They are not Internet wonders and were all but ignored by IPO buyers. These were deals that held my interest for a different reason altogether -- they were (and still are) well-run companies with solid balance sheets. I thought a few of them were worth a quick review by's

readers. Check these out:

Albany Molecular Research


priced 2.5 million shares on February 4 at $20. I held this deal out to be a super-performer and was looking for a big premium right out of the box. What I got instead was barely a 10% pop on the first day, which faded to a level below the issue price within a couple of weeks. What is remarkable is that after a pretty quick dip into negative territory, the stock began to move upward and, as of Friday, achieved a closing print of 29 7/8. Not a ripping move by Internet standards, but not too shabby either. A 49% gain is nothing to look down at. Let's look at another one.



on February 25 priced 3.5 million shares at $15. On the first day of trading the stock opened exactly flat, traded down a bit and ended the day with a 3/8 premium. Most IPO buyers would call that a failure, but Friday's close at 22 1/8 puts the stock up 47% since the offering date. Not bad.

TheStreet Recommends



issued 4.1 million shares at $10 back on April 8 and opened flat. The deal did deliver a small premium by the day's end, but was considered by most to have been a nonevent. Looking at the stock's close on Friday of 22 15/16, I would be pleased to own those IPO shares today. For you performance nuts, that's a pick-up of 129% in a little more than two months time. Again, not bad.

Now I know that there were plenty of better performers this year, many of them eclipsing the above-mentioned gains in their first few minutes of trading. However, what most of these highflyers did in later sessions was to lose value -- and many did so at alarming rates. The above list is remarkable in that they started off cold, then steadily gained ground, posting higher and higher stock prices over time. What's my point? OK, first the riddle, then the punch line:

What did the above companies have that most of their IPO peers lacked? Earnings: lots and lots of earnings.

In an IPO market filled with cheap thrills and one-night stands, it's nice to think that maybe, for those who are looking for a long-term relationship, the fundamentals really do matter.

Let's look at the week ahead:

Ben Holmes is the founder of, a Boulder, Colo.-based research boutique 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. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Holmes appreciates your feedback at

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