Baltimore firms decide against public offerings during volatile market
The initial public offering market dried up in 2008, with just 29 U.S. companies completing IPOs and a few Baltimore-area firms bypassing the process.
Those 29 deals raised $26.4 billion in 2008, according to Thomson Reuters data, a 43 percent dollar volume drop from 2007, making 2008 the slowest year since 2003. Had Visa not gone public in March and raised a record $17.9 billion, it would have been the worst year since 1990.
“Performance of 2008 new issues in the U.S. was abysmal by historical standards,” said Renaissance Capital, a Greenwich, Conn.-based IPO research and investment management firm.
The five largest companies to complete a public offering in 2008 and the money they raised:
» Visa, $17.9 billion
» American Water Works, $1.25 billion
» Intrepid Potash, $960 million
» GT Solar International, $500 million
» Williams Pipeline Partners, $325 million
The companies that did manage to complete their IPOs saw their stocks decline in value, with U.S. companies completing IPOs seeing a 32 percent decline in value, according to Renaissance Capital.
The market proved too difficult for many companies, with 110 canceling IPOs they had estimated to raise $17.27 billion, according to Thomson Reuters. In 2007, 71 deals were pulled by companies.
Metastorm, a Baltimore-based software firm, pulled its $86 million IPO in November due to volatile market conditions. The company had filed a request with the Securities and Exchange Commission in May to pursue an IPO.
“The current market is very risky and is not an ideal one in which to take a company public,” said Laura Mooney, Metastorm’s vice president of communications. “We are actively monitoring the market, and we will certainly consider refiling when market conditions improve.”
Timonium-based Bill Me Later, a transaction service provider, decided against an IPO and instead was acquired by eBay for $945 million in October. The deal was the largest merger or acquisition in the United States in the fourth quarter of the year, according to Dow Jones VentureSource.
CapitalSource, a Chevy Chase-based commercial lender, also in October delayed its IPO, but it didn’t say when it would consider returning to the market.
Looking ahead, IPO activity will again be low in 2009, according to Renaissance Capital. Investors are expected to stay away from risky sectors such as technology, health care and consumer firms, but they might be attracted to more defensive areas such as education, energy and defense.
It’s expected to take several years for IPO volume to return to prerecession levels, but historically, recession-time IPOs have performed well as the broader market gradually recovered, according to Renaissance Capital.
“While we are not expecting the IPO market to fully recover in 2009, we believe that there will be opportunities for IPO investors to buy shares of companies with solid fundamentals at attractive valuations,” Renaissance Capital said in its “2009 IPO Outlook” report.
