NEW YORK The shares of two telecommunications equipment makers and a bank holding company blew past expectations in their stock debuts Wednesday, reviving hope for what had been a sickly market for initial public offerings.
"The market is saying that with the improvement in the economy, tech spending will increase and the capex freeze that has been in place in most small, mid and large companies will likely be withdrawn," said IPO Boutique Senior Managing Partner Scott Sweet.
The success of First Interstate BancSystem Inc (FIBK.O) shares could signal an opening in the IPO market for banks, he added.
First Interstate closed up 8.3 percent at $15.70. Broadband chipmaker MaxLinear Inc (MXL.N) and telecom equipment maker Calix Networks Inc (CALX.N) performed even better, closing up 33.6 percent at $18.70 and up 16.2 percent at $15.10, respectively.
The IPO market to date has been discriminating. Many IPOs this year have been cut, postponed or canceled as investors shy away from risk in an uncertain market. But the market has shown signs of improvement over the past two weeks, with a handful of deals pricing within their expected range and several trading up in the aftermarket.
Wednesday's companies all showed strong growth potential. MaxLinear is solidly positioned in the tech-hungry Asian market with top customers including Tomen Electronics Corp 7558.T, Panasonic Corp (6752.T) and Sony Corp (6758.T).
It grew its revenue 64 percent to $51.4 million in 2009 and swung to a $4.3 million profit from a $1.9 million loss a year earlier.
Calix had a weaker balance sheet. Its net loss widened and its revenue slipped, but President and Chief Executive Carl Russo has a record of selling companies to Cisco and Intel Corp (INTC.O).
And last week, U.S. regulators unveiled a plan to upgrade Internet access for Americans. The plan could amount to billions in new sales for network equipment makers and analysts said Calix business partner Cisco Systems Inc (CSCO.O) will be among the top beneficiaries.
First Interstate, the first bank to go public since 2007, plans to tap the plentiful market of FDIC-assisted transactions.
The bank grew its provision for loan losses 35.8 percent to $45.3 million in 2009, but its net interest income after its provision for loan losses held nearly steady, slipping only 2.1 percent to $197.8 million.
The chief executive of Nasdaq OMX Group Inc (NDAQ.O) was bullish and said the IPO market was gaining strength.
"We have an increased number of IPOs," Bob Greifeld told reporters on the sidelines of a conference in Washington.
"The fundamental driver of an IPO is the business prospects of a company. That gives investors confidence to bet, to invest in the company. We are seeing more of those types of companies that are worthy of that investment," he said.
Nasdaq OMX runs equities and derivatives exchanges in the United States and the Nordic countries.
Both MaxLinear and Calix surged as much as 38 percent above their IPO prices, while First Interstate rose as much as 13 percent.
The performances came even as major U.S. stock indexes eased off 18-month highs set on Tuesday.
MaxLinear's chips are used mainly in mobile handsets and in-vehicle entertainment in Japan and in set-top boxes in Europe.
In its Tuesday IPO, the Carlsbad, California-based company sold 6.4 million shares for $14 each, raising $90.2 million. It had planned to sell 5.4 million at $11 to $13.
Petaluma, California-based Calix sells hardware and software that allow communications service providers to network with their residential and business subscribers. It said in a regulatory filing that its competitors included Huawei Technologies Co Ltd HWT.UL and Motorola Inc MOT.N.
Calix sold 6.3 million shares for $13 each on Tuesday, raising $82.3 million. It had planned to price the shares at $11 to $13 each.
First Interstate has about 72 bank branches in 42 towns and cities in Montana, Wyoming and western South Dakota. The Billings, Montana-based bank sold 10 million shares for $14.50 each, raising $145 million. It had planned to sell 8.7 million at $14 to $16.
Morgan Stanley (MS.N) and Deutsche Bank Securities (DBKGn.DE) led MaxLinear's IPO. Underwriters on the Calix offering were led by Goldman Sachs (GS.N) and Morgan Stanley. First Interstate's underwriters were led by Barclays Capital (BARC.L).
(Reporting by Clare Baldwin, additional reporting by Rodrigo Campos in New York and Rachelle Younglai in Washington, D.C.; editing by Lisa Von Ahn, Leslie Gevirtz and Andre Grenon)