The Beat(ing) Goes On

The weak secondary market continues. Out of 18 deals this week, I can't recommend any.
Publish date:

I just picked up

Generation of Swine: Tales of Shame and Degradation in the 80's

, a neat little paperback from Hunter S. Thompson. Rarely do I laugh out loud when I am alone. But, the last couple of nights my wife has had to ask me to keep it down, fearing that I would wake our sons with my giggling fits. Very funny stuff. Go today and buy yourself a copy. You need this.

What is not funny is this stock market. This week's secondaries are as pale and shaky as last week's. As I have advised in previous columns on the topic, if you can stave off your broker until the morning of pricing to accept any allocations in these deals, you should. To do otherwise is to go long a sack of uncertainty. Be safe and protect your capital at all costs, even if that means in some cases an opportunity lost.

Let's have a look:


  • 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 , a Boulder, Colo.-based research boutique (now a wholly-owned subsidiary of 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 has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from