Posted by: Aaron Pressman on May 26, 2006
Not a speck of light is showing
So the danger must be growing
Are the fires of Hell a-glowing
Is the grisly reaper mowing
Yes, the danger must be growing
For the rowers keep on rowing
And they’re certainly not showing
Any signs that they are slowing
Ah, the original movie version of Roald Dahl’s masterpiece Charlie and the Chocolate Factory – great flick for kids of all ages. Too much of this week’s coverage of the IPO market brings to mind the wacky-scary song Master Wonka sings as he takes the kids minus fudgy Augustus Gloop on a wild boat ride from the chocolate room to the inventing room. Just when it seems too freaky and everyone wants off, the boat comes to an instant full stop and the tour continues on dry land.
What’s Pressman on about this time? Well, seems like the stock market had a wild ride for a couple of days and on Tuesday Vonage (Symbol: VG) priced its half billion dollar deal on the backs of its customers and promptly dropped like a stone. Oh no, woe is us.
So with apologies to Willie Wonka, are the fires of hell a-glowing for Citigroup, Deutsche Bank and UBS, underwriters of the Vonage deal? Is the grisly reaper mowing Vonage’s share price? Certainly the danger must be growing of an IPO bubble blowing for the underwriters certainly aren’t showing any signs that they are slowing.
And then, as suddenly as the fear factor rose, it’s gone, or should be, and we’re standing on dry land. On Thursday came the humungous Mastercard (MA) deal, priced smartly and now up more than 10%, followed by Mueller Water (MWA), up a modest couple of percentage points today. And Burger King (BKC) is up about 2% from its pricing last week.
So sorry IPO whiners, even if there’s no hunger for cash burning business plans masquerading as hot growth companies, there’s plenty of capital available for the real thing. Expect more tears from trapped VCs and more initial public offerings from interesting companies. The next couple of weeks should see Russian TV owner CTC, profitable online real estate service Loopnet and wire maker (really…) Houston Wire & Cable priced. And the hottest IPO market since 2000.