| Can a Bottom Save the Remaining IPO Market?
Overall, the major disappointment for the quarter was the battering taken by the core measurement of success for IPOs – the Nasdaq Composite. At the final tip of the quarter, the tech-laden index fell 26% to 1,840.26. But, the damage has been done and it will take several months, if not years to regain lost footing from the storms faced on the corners of Broad and Wall Street. Analysts we spoke with were highly concerned that even if the markets find a bottom, it will be a lost cause for the IPO market as many hopeful entities were forced to derail plans for public offerings. Again, while market handicappers continue to speculate on when a bottom will be reached, new issue gurus hope that prospective investors follow advice and adapt a wait and see approach. One sector that used to be the apple of everyone's eye has definitely taken a hard fall from its perch. I'm referring to the once invincible technology arena. A solid way of seeing how this piece of the market has suffered is to look a chart on the Nasdaq Composite since it set an all-time high in the early portion of 2000. Based upon Friday's close, the Composite is off 63% from its all-time high of 5,022.23, thus creating a winnowing effect in the backlog of deals in registration. "Chronic indigestion has occurred and will probably continue," said Steven Tuen, director of research for New York-based IPO Value Monitor. "It has been a long time since anyone has seen a market of this caliber. I guess that after binging for the past three years, the IPO market is now paying the price." To no avail, the performance of IPOs during the quarter was unhealthy to say the least. The average first day return (offering price to first day closing price) for all IPOs in the quarter was +7.6%, while the average percentage change for the quarter (offering price to closing price on March 30th), was -6.2%. Tuen, who also serves as executive advisor to The Kinetics Internet Fund added that, "with the massive amount of withdrawals experienced during the quarter, the pipeline of deals on file with the Securities and Exchange Commission has become more manageable. The question facing those entities is whether or not they are still worthy of going public. Unlike prior instances, investors in this environment want to see if a particular firm has a solid business model and if could be an attractive investment for participation."
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