LOS ANGELES — Nearly two months after Facebook Inc.'s botched debut chilled the outlook for initial public offerings, five companies are looking for a thaw on Wall Street.
Travel website Kayak Software Corp., software developer Palo Alto Networks Inc., guitar maker Fender Musical Instruments Corp., teen retailer Five Below Inc. and biotech company Durata Therapeutics Inc. said they are proceeding with their IPOs.
Analysts say that the shadow from Facebook's debacle continues to darken the mood for new stock issues and that the five planned IPOs don't represent a resurgence in public offerings. Facebook's stock plummeted 27 percent in the first two weeks on the market and continues to trade below its IPO price. No other company launched an IPO for five weeks after Facebook's flop.
“I wouldn't go out blowing a horn, saying the coast is clear,” said Scott Sweet, senior managing partner of IPO Boutique. “I'd love to say so, but the underwriters hurt a lot of people badly. After Facebook, there's a lot of apprehension that a lot of that nonsense could happen again.”
This year has been weak for initial public offerings. According to research firm PrivCo, total dollars raised through IPOs so far this year has fallen by nearly half compared with the same period last year, not even counting Facebook's offering.
Sam Hamadeh, the head of PrivCo, said the companies about to go public do not signal that the market is improving, especially given the modest sizes of the offerings.
“These are bite-sized, digestible IPOs,” he said. “The market cannot handle multibillion-dollar IPOs right now.”
Kayak set a price range of $22 to $25 a share for its long-delayed IPO, which could happen next week. The company originally filed in November 2010 to go public, but repeatedly held off its offering.
Palo Alto Networks announced Monday that it will offer 6.2 million shares at $34 to $37 apiece. It's expected to price the shares and make its debut next week.
Fender said it will sell 10.7 million shares at $13 to $15 each. It did not say when it would set the price and begin selling shares.
Five Below is looking to raise $135 million with shares priced at $12 to $14 each. Durata said it plans to seek almost $86 million with shares at $11 to $13 each.
None of these companies are anything like Facebook's $16-billion offering, nor do they have the same appeal for retail investors, said Brian Wieser, an analyst with Pivotal Research Group. The real test would be if there were another jumbo IPO like Facebook, he said.
PrivCo's Hamadeh said Facebook's massive offering would have weighed heavily on the market even if it had been a success.
“Even if it had performed well, we predicted there would have been a drought just in terms of how much capital it sapped,” he said.
Four companies that went public at the end of June, after the post-Facebook drought, have had mixed results. Those included cloud-based software company ServiceNow. Its stock price jumped 37 percent on its first day of trading, and closed Tuesday at $25.05, up almost 40 percent from its IPO price of $18.
On the other hand, software company Exa Corp. fell 2.3 percent on its first day of trading. It has since made up that ground, and at its Tuesday closing price of $10.10 trades 1 percent above its IPO price.
Analysts said Palo Alto Networks is a good candidate for an IPO, even in the risky environment.
“Every cloud-based service IPO this year is up, and Palo Alto Networks is the cream of the crop. Its numbers are the best, its growth numbers are the fastest of the group and it's already profitable,” Sweet said.
Analysts are less excited about Kayak, even though it posted $73.3 million in revenue in the first quarter, 39 percent more than the same period last year. The company reported $4.1 million profit in the quarter, compared with a loss of $6.9 million last year.
Hamadeh said Kayak has put off its offering as long as it can. But to go public between the Fourth of July and Labor Day is risky, he said, because many of the people on Wall Street who help bring companies to market go on vacation then.
“To try it now I think is insane, but based on their cash position, they probably don't have much of a choice,” Hamadeh said.
Fender also drew skepticism from some analysts.
“They are hoping to get caught up in a wave of enthusiasm from guitar enthusiasts, not investment professionals,” said Arnie Ursaner, managing director at CJS Securities. “It's like Facebook — it gets people so caught up in the brand they don't pay attention to the valuation.”
MCT Information Services
I wouldn't go out blowing a horn, saying the coast is clear. I'd love to say so, but the underwriters hurt a lot of people badly. After Facebook, there's a lot of apprehension that a lot of that nonsense could happen again.”