Soccer club Manchester United's flat debut on the New York Stock Exchange on Friday ended a rocky but busy week for initial public offerings.
Soccer club Manchester United’s flat debut on the New York Stock Exchange on Friday ended a rocky but busy week for initial public offerings.
On Tuesday, Outback Steakhouse’s parent company priced its IPO below expectations, and the owner of the Carl’s Jr. fast-food chain postponed its planned stock offering Thursday night. It added up to an anticlimactic ending to the busiest week for major IPOs since Facebook’s problem-plagued debut in May.
Investor reaction to the debuts show that they are pushing back on pricing and staying cautious if the company’s finances are questionable. But if the price is right and the company is solid, investors are willing to buy.
After a five-week lull following Facebook’s IPO, have been 22 initial public offerings since the last week in June. Of those, 17 are now trading above their IPO price.
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“The greed factor is back,” said Francis Gaskins, president and editor of IPODesktop.com. But investors are being cautious about which companies to buy into, he said. “When you have big leveraged buyouts with a big brand, they have to show bottom-line profit,” to succeed.
If they don’t, investors won’t bite, as Manchester United found on Friday. Its shares were flat at $14 in midday trading on the New York Stock Exchange, the level they were priced at by the underwriters late Thursday. The shares trade under the MANU ticker symbol. The stock had predicted the IPO to price between $16 and $20.
The sports team is the best known in the world, but its finances are less sterling. It is hundreds of millions of dollars in debt and expects to report a loss for the year ended June 30, excluding a tax credit, with revenue down 3 percent to 5 percent.
Since Facebook’s debut in May, investors are increasingly demanding lower stock prices, as well. Ten of the last 11 IPOS have priced below their expected range, said Nick Einhorn, an analyst at research firm Renaissance Capital.
“In the last few weeks, investors kind of in general have been somewhat cautious,” he said. “There’s price sensitivity.”
Bloomin’ Brands, parent of Outback Steakhouse and other restaurants, for example, priced its offering of 16 million shares at $11 per share, below the $13 to $15 per share expected. But the stock rallied, up 17 cents at $13.66 by midday Friday, up 24 percent from its IPO price. It closed Friday at $12.86, down 4.7 percent for the day.
Another expected IPO, from Carl’s Jr. parent CKE Inc. on Friday was postponed. The company blamed market conditions.
Performant Financial Corp.’s initial public offering of 9 million shares on Friday priced at $9 per share, below an expected range of $12 to $14. Shares rose $1.60, or 11 percent, to close Friday at $10.60. The Livermore, Calif., company, helps its government and private clients assess and collect delinquent or defaulted assets like student loans and Medicare overpayments.
Tech company Peregrine Semiconductor Corp.’s shares priced at $14 on Wednesday, at the low end of its expected range of $14 to $16. Shares have traded as high as $15.81 but were up 17 cents to $14.68 during the day Friday, 5 percent above its opening price. The stock closed for the week at $14.90.
The summer IPO season got off to a slow start because of the fallout from Facebook’s disappointing market debut.
Facebook shares began trading publicly on May 18 at the top of their projected IPO range, but ended up closing barely above their IPO price at $38.23 and have fallen sharply since then.
The offering was plagued with other problems too, including glitches with the Nasdaq stock market that delayed trading by half an hour. After that there was a five-week pause in IPO debuts, a “Facebook freeze.”
Facebook’s stock closed Friday at $21.81, down 43 percent from its IPO price.
But the late spate of summer IPOs could bode well for the rest of the year, Gaskins said.
“This is a good omen going into a fall, as long as the averages don’t tank,” he said. “I suspect fall will be a busy season.”