There's no question about it, the majority of the secondary and follow-on issues that we're tracking have been hit hard over the last few weeks. As I write this I'm looking through our tracking portfolio and seeing share prices down 40% to 70% from when they were filed. This wasn't a sudden thing, however. Many of these issues have been steadily sliding since mid-March. Last week just killed off the most resistant of the bunch.
Today is a different game altogether. As I write this, 49 of the 68 issues in registration that we are tracking are up at least a half a buck today. Some of those are up by as much as 10 or 20 points. While only 19 out of the 68 are trading at or above the price at which they were filed, the immediate trend is definitely one of improvement. So what is my point?
Things are firming up in the secondary calendar,
... I would continue to be careful when buying the deals. This means waiting if possible until the morning of pricing to take any allocations. If you cannot work this way with your broker, at least have a minimal plan in place before you get involved. By this I mean:
1. Know how long you plan to hold the stock.
2. Know what your tolerance for risk is (how much you are willing to lose before you close out your position). Finally, no matter what happens,
stick to your plan.
I know I'm being redundant by laying this "have a plan" jazz on you again, but we need to remember the basics when things get hairy.
Now go and get back to work. Yeah, that's right, you heard me. Don't think I don't know that most of you are goofing off at work. It's OK though, I'm sure your boss has his or her own online trading account.
Let's take a look at the deals (for an explanation of these ratings, 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