This Week in IPOs

<I>TSC</I> introduces a new column on the booming IPO market.
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With this column we introduce Ben Holmes, the founder of, a Colorado-based research boutique specializing in analysis of equity syndicate offerings. Ben developed his craft as a hedge fund manager with Worldwide Capital Corp. on Long Island, where he managed positions in IPOs and follow-on offerings. In 1997, he started ipoPros ( to bring IPO and follow-on research to individual and professional syndicate investors. During his career, he has participated in more than 2,000 IPOs and secondary offerings. Neither Ben Holmes nor ipoPros has a position in, or has requested any shares in, the offerings mentioned in this column.

As a professional involved in the new-issues market for the past 11 years, I have come to view the ups and downs of the IPO market with a somewhat jaundiced eye. And for much of the past decade, the new-issues market remained an insider's game, which only the institutions could play and win.

But the Internet has changed all that, at least if you follow what some individual investors are doing, thanks to the availability of the hottest IPOs through



Wit Capital




This occurred to me while standing in line at the local sushi joint here in Boulder, Colo. My wife and I struck up a conversation with the man ahead of us, and when small talk turned to "what do you do?" he told us that he had quit his job as a real estate broker to daytrade the stock market. I asked him if he ever got involved in IPOs.

"Oh yeah," he said, grinning. "I got a little



, a few hundred shares of

Critical Path


and some



, but the real killer was



. I made 20 grand on that one."

I smiled knowingly at the man and noticed that he had broken a slight sweat while talking. I had seen this before. Just then a woman who was seated close to the door leaned her chair toward us and interrupted, "You're talking about IPOs? I sold my



stock up 22 points on the first day!" she exclaimed.

I congratulated her on her winnings and stared at the droplets of perspiration that had formed on her upper lip. Another victim. Sad.

My wife looked at me, her eyes conveying the understanding and sympathy that she felt for me -- the same sympathy that I now had for these two people. The IPO virus was spreading.

While I make light of the public being infected with the new-issues bug, I cannot help but think about how it might end. The opening up of the syndicates to individual investors last fall just happened to coincide with the beginning of what has become the hottest IPO market cycle in more than five years.

What this new crop of IPO buyers has not yet lived through is the swift and violent way in which these cycles inevitably end. Will they recognize the turn when it arrives? Or, will these tenderfoots continue feeding on the low-quality deals that are typically shoved through the door in the last moments of a dying market cycle?

I guess we'll deal with that day when it comes. But for now, at least from where I sit, this is the healthiest IPO market I've seen in this decade. The public's demand is growing by the day, the supply is healthy in terms of both quality and quantity, and there's no slowdown in sight.

The question we all have been forced to at least acknowledge is that of valuations and the sometimes laughable first-day premiums the Internet IPOs have displayed in recent months. This has made the job of analysis a little more difficult than usual, but the reality is that the trend continues.

And for those who dismiss the current market as the latest incarnation of tulip-bulb mania, I ask: Who is the greater fool: the person who stays out of the IPO market citing ridiculous valuations or the one who continues to sell his or her new-issue shares up 20, 30, 40 points?

The Week Ahead

Last week we saw a fairly heavy calendar of offerings, many of which were excellent performers in their first-day sessions. Obviously, anyone involved in the IPOs of

Extreme Networks

(EXTR) - Get Report





Rhythms Netconnections


, or

US Internetworking


had to be pleased with the price gains they received. Now, into the second quarter's third week, it looks like this IPO cycle continues to push ahead.

This week looks to be another busy one for syndicate players. With 13 deals -- eight IPOs and five follow-ons -- on the docket, there should be plenty to do for everyone involved in the new-issues game.

Getting down to business, here's a look at what's on tap for this week:

This Week's IPOs

Ben Holmes is the founder of, a Boulder, Colo., firm that analyzes new and secondary equity offerings. Previously he was a portfolio manager at Worldwide Capital Corp. in Long Island, a hedge fund that took positions in initial public offerings. This column is not meant as investment advice; it is instead meant to provide insight into the methods of new and secondary offerings. As a matter of policy, neither Holmes nor his firm has asked for any 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. While he cannot provide investment advice or recommendations, Holmes appreciates your feedback at