RPT-IPO VIEW-End of one IPO drought, start of new one?

(Repeating item that initially moved on Friday)

By Phil Wahba

NEW YORK, Nov 23 (Reuters) - Last week's initial public offering by Grand Canyon Education Inc (LOPE.O) broke the longest streak without an IPO in the United States since 1974, but it is not likely to open the floodgates to new IPOs anytime soon, bankers and analysts said.

The Arizona-based online university operator became the first company to manage to float shares in the United States since August, a 15-week period that saw 29 companies pull out of the IPO pipeline, according to Thomson Reuters data.

But Grand Canyon is not expected to have the same cathartic effect on the IPO market as the debut of Internet auction house eBay Inc (EBAY.O) in September 1998. That deal single-handedly revived an IPO market brought to a standstill by a financial crisis in emerging markets. Proceeds from IPOs in October 1998 were 44 times higher than those of the preceding month.

The severity of the current financial crisis is likely to make the Grand Canyon deal a "one-off," said Mark Hantho, global co-head of equity capital markets at Deutsche Bank.

"Regardless of how the IPO performs, it won't open the door to more companies trying an IPO," he said. "Frankly, companies venturing into this market are going to be valued less on their fundamentals than on general market sentiment."

BRING DOWN THAT PRICE

Sure enough, despite what analysts have called its strong growth, Grand Canyon twice had to reduce its price, settling for proceeds of $126 million, a bit more than half what it was hoping for when it filed in May. That makes the deal only the 18th largest of the 29 U.S. IPOs so far this year.

"It shows if you have a high-quality company in a defensive sector that you can get a transaction completed, albeit at a healthy discount to its comps," Jen Caruso, a senior vice president of equity capital markets with Jefferies & Co said, referring to a company's peers that are better known to investors.

One commonly used tool to value a company is its price-earnings multiple. Paul Bard, a research director at Connecticut-based Renaissance Capital, said that in this market, an IPO's multiple would need to be about 30 percent below comparable, already public companies, while normally that discount would be about 15 percent.

After its deal priced on Wednesday evening, following a session that saw the Dow Jones Industrial Average .DJI fall 5 percent, Grand Canyon saw first-hand how investors are demanding larger-than-normal discounts from IPOs.

"The fact that it broke its IPO price shows investors are quick to run for the exits at the first hint of trouble," Bard said of the shares' 17 percent drop as soon as trading started Thursday. "IPOs are lower down on the totem pole."

FIRST DAY RETURNS AS BAROMETERS

Grand Canyon stocks ultimately came back Thursday, finishing down only 1.25 percent. By Friday afternoon, they were trading slightly below their offer price of $12, a performance that might go some way to showing investors that an IPO can at least hold its own.

To get the markets rolling again, "you need to see positive returns in initial after-market trading; but it's been poor and that's not helpful," Bard said.