2001 Year-In-Review

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Better Days Lie Ahead:
IPOs Post Better Results than Overall Market

By Jeffrey R. Hirschkorn, Senior IPO Analyst

2001 may have been one of the weakest periods in recent memory for initial public offerings. Still, while deal flow was down to levels not seen in over 20 years, the more indicative barometer was the average performance of new issues from offering price. While the major market averages continued to teeter on negative soil, stocks that made their Wall Street debut, reflected gains of 14.7% over offering.

"The IPOs that started to come out during the fourth quarter were of a better quality," said Ward Morgenthau, senior vice president at Laidlaw Global Equities, in a recent interview. "Rather than the same old tired offerings that just bombed."

Added Richard Peterson, chief market strategist for Thomson Financial Securities Data: "After a dismal first half of the year, new issue filings have picked up and withdrawals of filed deals have started to abate. Investors want to have some anchor for their investment in the IPO marketplace. It doesn't necessarily have to be a company that has to make earnings. But a company has to have a solid business model opposed to an idea or concept."

Not many people give the investment bankers enough credit for carefully screening candidates to succeed in this marketplace. In fact, towards the end of 2001, bankers realized that highly speculative transactions wouldn't succeed and thus turned to more stable floats from the likes of Prudential Financial (ticker: PRU).

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