| April 17
April 17 Companies looking to go public in the
United States will have to temper their expectations as
investors begin to question valuations in a crowded market.
The next few weeks will be closely watched as the market
prepares for the listing of Chinese e-commerce giant Alibaba
IPO-ALIB.N, which is expected to file for its offering as
early as Monday.
More than half of the 25 companies that have gone public
this month have priced their offerings below the expected range.
This is the second highest since June 1998, according to Thomson
In contrast, out of the 29 IPOs in March, only two were
priced below their expected range, while five were priced above.
Bankers have responded by pricing the IPOs lower and also
offering fewer shares to sustain the demand.
"The underwriters realize that they have a cash cow and what
they have been doing is reacting swiftly and specifically about
cutting the valuation of these companies to keep the train on
the tracks," said David Menlow, president of IPO research firm
IPO Financial Network.
Sabre Corp, the airline ticketing technology
provider that also owns online travel agency Travelocity, sold
fewer shares than expected and priced them below the targeted
range. The company's shares rose as much as 7 percent in their
Weibo Corp, the owner of a Chinese Twitter-like
messaging service, priced the offering at the low-end of its
target range. The company's shares soared 44 percent in their
debut on Thursday.
The recent pullback in U.S. stocks, especially those of
high-flying technology and biotechnology companies, has taken a
toll on the IPO market, which got off to a strong start in the
first quarter of the year.
U.S. IPOs raised more than $18 billion in the first three
months of the year, making it the best quarter in more than a
decade. Technology companies raised about $4 billion, compared
with $1 billion a year earlier.
"The market has stumbled very decidedly because of the
recent deals... King Digital and La Quinta were a huge
disappointment for the marketplace and caused everyone to start
to realize that maybe things had topped out," said Menlow.
Shares of "Candy Crush Saga" game maker King Digital
Entertainment Plc are down 20 percent since their debut
last month, while those of Blackstone-backed hotel chain La
Quinta Holdings Inc have hovered around their offer price
The tech-heavy Nasdaq Composite index is down about
6.5 percent since its March 6 high, and recorded its biggest
one-day drop in 2-1/2 years last week.
The benchmark S&P 500 index is also down about 2
percent through Wednesday's close, since hitting a life-high of
1,897.28 on April 4.
All this is expected to cast a shadow on Alibaba's eagerly
awaited IPO, which is set to be the largest since Facebook Inc's
$16 billion offering in 2012.
"It would mean that the Alibaba IPO needs to come
substantially cheaper than everybody thinks out there," said
Josef Schuster, founder of IPOX Schuster, a Chicago-based IPO
research and investment house.
"Nobody is going to give Alibaba the valuation it would have
gotten probably 4 or 5 weeks ago."
(Additional reporting by Tanya Agrawal; Editing by Sriraj