Can We Erase the Bad Memories?

There are many questions surrounding the potential for 2001, but there seems to be a split amongst projections. On one hand, analysts project a rather slow start and on the other hand, if market conditions are bright, we can then witness a rebirth of the initial public offering marketplace.

"At this point, we're in a holding pattern as investors are unsure of how to value their holdings," concluded Tuen. "This is due to the slowing economy and in this environment new economy firms are being held to a different standard. Key to success in this market is the ability to manage growth and expenses and to have defensible attributes to the business."

Renaissance Capital Management added in its report that, "despite the negative returns as IPOs and the market volatility, positive developments are going on under the surface. In volatile markets, sellers jettison good stocks along with the bad. Newly public companies are particularly susceptible in this type of environment."

In addition, Renaissance concluded that, "the pipeline has fallen from a bloated 400 deals down to a more manageable 200 deals. The winnowing of the pipeline allows quality deals to shine through. With the Presidential melodrama finally coming to a resolution and the economic and interest rate picture gaining a clearer focus, the broader market looks set for a rebound in 2001."

Some valid points investors should take note include:

  • Investors have learned their lesson from the fall-out of speculative issuers. For this reason, expect fundamentals to figure more prominently in the future IPO market equation.
  • Macro factors will continue to affect the broader market in 2001. While the Fed has made no direct indication of a forthcoming rate cut, poor preliminary fourth quarter numbers has enabled the Fed to change its bias. A rate cut should make the environment more amenable to IPOs. New rules on retirement savings could also spur an influx of money that could boost interest in IPOs.
  • Expect a further pipeline mix shift skewed toward more established companies coming to market with bigger deal terms.
  • It is often in tough times that investors are able to find the best IPO values. Discerning investors should be able to find higher quality deals with reasonable valuations.

To gauge what analysts are looking for as hot stocks, please refer to our accompanying table that lists some of the deals to watch.

previous  


Copyright 1996-2000 IPO Monitor. All rights reserved. Redistribution or publication of this content is expressly prohibited without the prior written consent of IPO Monitor. This information is provided AS-IS, without any warranty of any kind. IPO Monitor makes no claims concerning the accuracy or validity of the information, and shall not be held liable for any errors, delays, omissions or use thereof.

Please report problems with this site to: ipo-admin@ipomonitor.com