| April 11
April 11 Ally Financial Inc wanted the
U.S. government sell its entire 36.8 percent stake in the auto
lender on Thursday, but the IPO market wouldn't cooperate so it
had to settle for less.
It's the kind of calculation that many issuers and their
bankers are increasingly having to do as they watch the mood in
the market change to caution from exuberance, to selective
interest in high-quality companies from enthusiasm for just
about any hopeful entity that stumbled onto an exchange.
"I think if we had pushed it to get them all the way out,
closer to $5 billion, that would have been a staggeringly large
IPO and a potential train wreck in the marketplace," said Ally
Chief Executive Michael Carpenter.
Ally's shares priced at the lower end of a proposed range,
and fell 4.1 percent on their debut on Thursday, though they
recovered some of those losses on Friday. Carpenter said he
expects the government, which sold all the shares in the $2.38
billion offering, to sell its remaining stake over the course of
the year. [ID: nL3N0N23Z9]
Some investors and bankers said that while companies with a
strong profile could still get deals done, they would have to be
a lot more conservative about the valuations they expect. And
those with little or no earnings, or unclear growth prospects,
may put off their plans as they won't make it through.
"IPOs are generally a function of excitement and
bullishness," said Jerry Jordan, manager of Jordan Opportunity
Fund in Boston. "If you unwind the speculative part of the
market and that's where the bulk of the IPOs are, it falls
That could be a test for the 11 IPOs scheduled to price next
week, which include such high-profile companies as investment
bank Moelis & Co, travel services company Sabre Corp and Chinese
microblogging site Weibo.
Bankers said it was too early to know how these companies
will do, but everyone was watching market conditions closely.
Moelis declined to comment. Sabre and Weibo could not be
immediately reached for comment.
The changing investor appetite would end a blockbuster run
in the IPO market this year. So far, 85 U.S. IPOs have raised
$18.3 billion, the most since 2000, according to Thomson Reuters
But investors are getting more discerning. Of the 29 deals
in March, for example, five priced above their expected range,
while only two came in below. In comparison, of the 16 deals
priced so far in April, only one has priced above its range,
while five have priced below, the data shows.
The change coincides with a pullback in the broader equity
markets, as fears on Wall Street about over-stretched stock
valuations increasingly push investors into safer sectors, such
High-flying technology and biotechnology shares have borne
the brunt of the pullback, with the tech-heavy Nasdaq composite
index recording its biggest drop in two-and-a-half years on
"The IPO market is now experiencing a higher level of
discretion based on the fact that a number of deals were rushed
to market in response to what has been a robust market," said
Jim Cooney, head of healthcare equity capital markets at Bank of
America Merrill Lynch.
Despite a more sober view in the market, there is still
investor appetite for consumer, healthcare and restaurant
companies, bankers said.
Shares of casual dining chain Zoe's Kitchen Inc,
for example, rose as much as 73 percent in its market debut on
Friday after pricing at the upper end of the expected range.
Bankers said a pullback in the technology sector also did
not mean that all companies would run into trouble. Weibo and
Chinese ecommerce companies Alibaba Group Holding Ltd and JD.com
are still expected to appeal to investors when they list in the
A source familiar with JD.com's IPO plans said it was not
thinking of delaying or changing its debut, which is expected in
July. JD.com could not be immediately reached for comment.
Still, investors and bankers said there will be fewer
Already some companies have delayed their listings.
Three IPOs, medical technology company Lombard Medical Inc,
Greece-based shipping company Stalwart Tankers Inc and software
company Paycom Software Inc, were postponed this week.
"The window is closing as we speak," said Kathleen Smith, a
principal at Renaissance Capital, an IPO investment firm, told
Reuters TV. "We have not been in a friendly market for a little
(Additional reporting by Peter Rudegeair and Rodrigo Campos in
New York, and Elzio Barreto in Hong Kong; Editing by Paritosh
Bansal, Martin Howell)