It Was a Manic-Depressive 12 Months for the IPO Market

It was a 12-month roller-coaster ride for initial public offerings in 1998, a ride that included some of the largest deals in history but fewer deals than in the previous two years.

Marked by massive swings in IPO activity, 1998 turned some companies into household names as their offerings shot to record highs in just hours of trading.

“It’s kind of unusual to see such dramatic swings within one year--the term that comes to mind is manic-depressive,” said Jay Ritter, an IPO specialist and professor of finance at the University of Florida in Gainesville.

Although the first few months of 1998 were steady and quiet, the market began to warm up in the spring with such big names as Broadcom Corp., the Irvine semiconductor maker that rose 123% on its first trading day in April, and continued to heat up through early July. Two tech companies had big openings in June: Marina del Rey-based GeoCities and San Mateo-based Inktomi Corp., up 119% and 100%, respectively, on their first trading days.

In the fall, an early freeze shut down the IPO market, and for three consecutive weeks no initial offerings were made, a rare drought.

But in late September, a little San Jose company called EBay Inc. hit the market with one of the best-performing IPOs of all time, not just in its first day but over a sustained period, signaling an IPO market comeback. Then came blockbuster deals in December by San Francisco-based Xoom.com Inc., up 146% on its first day, and Pasadena-based Ticketmaster Online-Citysearch Inc., up 187.5%.

“When the stock market took a breather in the fall, so did IPOs,” said Gail Bronson, an analyst with IPO Monitor, a Calabasas data firm. “In the past few weeks, we’ve been riding the crest of a good economic backdrop, low interest rates and relative prosperity, and companies are taking advantage of this.”

The year ended with a total of $37.7 billion raised in 363 IPOs, according to CommScan, a New York-based investment banking research firm, making it slower than last year, when $39 billion was raised in 547 IPO deals. In 1996, $46 billion was raised in 760 IPOs.

Although many of the biggest names this year were California companies, the list wasn’t completely dominated by the northern part of the state, a hopeful sign to some specialists eagerly watching the local economy. When a company raises money through a first-time stock offering, the proceeds are often used to pay for expansion and hire more people.

“It’s great news for California,” said Alfred E. Osborne, head of entrepreneurial studies at UCLA’s Anderson School of Management. “It shows a resilience of our intellectual capital to go where the opportunities are. And many of these IPOs were from Southern California companies. We’ve reinvented ourselves.”

This year had not only several of the better-performing IPOs after just one day, but also some of the largest offerings ever.

The largest deal this decade was by oil producer Conoco Inc., which raised $4.4 billion in October. This month, CBS Corp.’s Infinity Broadcasting Corp., one of the biggest U.S. radio and billboard companies, raised $2.87 billion in the third-largest IPO by a U.S. issuer this decade. And Fox Entertainment Group Inc. raised $2.81 billion in November, the fourth-largest IPO of the decade.

But while many deals posted spectacular first-day price gains of 100%, 200% or more, the aggregate performance for the year is less glowing.

While Internet IPOs rose an average of 120% this year as of Tuesday’s close, non-technology IPOs fell an average of 7%, according to Securities Data Co. Excluding Internet companies, IPOs rose 1% on average. Including the spectacular performance of Internet IPOs, the average gain was 15%.

But the aggregate performance of all IPOs trailed the 27% rise in the Standard & Poor’s 500 index this year, through Tuesday. Bloomberg News’ IPO index, which tracks companies during their first publicly traded year, is up about 10% for the year.

For every EBay--up about fifteen-fold so far--there are many that flame out as quickly as they appeared.

As the University of Florida’s Ritter put it, “A lot of these are going to be dogs in the long run.”

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Offerings in the ‘90s

The number of initial public offerings and the amount of money raised are down in 1998:

Money Raised

United States: $37.7 billion

California: $3.4 billion

*

Number of IPOs United States: 363

California: 66

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* Through Dec. 22

Source: CommScan

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1998: The Year in IPOs

10 Best-Performing California Offerings This Year

Tech companies dominate the list of the state’s strongest initial public offerings this year, and none has matched the performance of Internet auction site EBay.

Issuer: EBay

Total amount raised, in millions: $63.0

Lead manager: Goldman Sachs

Pricing date: 9/23

Ticker symbol: EBAY

Issuer headquarters: San Jose

Offer price: $18

First day % change: +163.19%

Dec. 22 price: $301.00

% change, offer to Dec. 22: +1,572%

*

Issuer: Inktomi

Total amount raised, in millions: 40.6

Lead manager: Goldman Sachs

Pricing date: 6/9

Ticker symbol: INKT

Issuer headquarters: San Mateo

Offer price: 18

First day % change: +100.00

Dec. 22 price: 135.13

% change, offer to Dec. 22: +651

*

Issuer: Broadcom

Total amount raised, in millions: 84.0

Lead manager: Morgan Stanley Dean Witter

Pricing date: 4/16

Ticker symbol: BRCM

Issuer headquarters: Irvine

Offer price: 24

First day % change: +123.44

Dec. 22 price: 116.38

% change, offer to Dec. 22: +385

*

Issuer: Verisign

Total amount raised, in millions: 42.0

Lead manager: Morgan Stanley Dean Witter

Pricing date: 1/29

Ticker symbol: VRSN

Issuer headquarters: Mountain View

Offer price: 14

First day % change: +82.14

Dec. 22 price: 59.31

% change, offer to Dec. 22: +324

*

Issuer: Exodus Comm.

Total amount raised, in millions: 67.5

Lead manager: Goldman Sachs

Pricing date: 3/18

Ticker symbol: EXDS

Issuer headquarters: Santa Clara

Offer price: 15

First day % change: +84.17

Dec. 22 price: 62.94

% change, offer to Dec. 22: +320

*

Issuer: Ticketmaster Online

Total amount raised, in millions: 98.0

Lead manager: NationsBanc Montgomery

Pricing date: 12/2

Ticker symbol: TMCS

Issuer headquarters: Pasadena

Offer price: 14

First day % change: +187.50

Dec. 22 price: 48.50

% change, offer to Dec. 22: +246

*

Issuer: Bebe Stores

Total amount raised, in millions: 27.5

Lead manager: BancBoston Robertson Stephen

Pricing date: 6/16

Ticker symbol: BEBE

Issuer headquarters: Brisbane

Offer price: 11

First day % change: +19.89

Dec. 22 price: 31.75

% change, offer to Dec. 22: +189

*

Issuer: Beyond.com

Total amount raised, in millions: 45.0

Lead manager: Deutsche Bank Securities

Pricing date: 6/16

Ticker symbol: BYND

Issuer headquarters: Sunnyvale

Offer price: 9

First day % change: +47.22

Dec. 22 price: 25.19

% change, offer to Dec. 22: +180

*

Issuer: Terayon Comm. Sys.

Total amount raised, in millions: 39.0

Lead manager: BT Alex. Brown

Pricing date: 8/17

Ticker symbol: TERN

Issuer headquarters: Santa Clara

Offer price: 13

First day % change: +11.06

Dec. 22 price: 35.88

% change, offer to Dec. 22: +176

*

Issuer: Xoom.com

Total amount raised, in millions: 56.0

Lead manager: Bear Stearns

Pricing date: 12/8

Ticker symbol: XMCM

Issuer headquarters: San Francisco

Offer price: 14

First day % change: +145.99

Dec. 22 price: 34.88

% change, offer to Dec. 22: +149

10 Largest California Offerings This Year

Issuer: Maxtor

Total amount raised, in millions: $332.5

Lead manager: Salomon Smith Barney

Pricing date: 7/30

Ticker symbol: MXTR

Issuer headquarters: Milpitas

Offer price: $7.00

Dec. 22 price: $13.50

% change, offer to Dec. 22: +92.9%

*

Issuer: Aurora Foods

Total amount raised, in millions: 304.5

Lead manager: Goldman Sachs

Pricing date: 6/25

Ticker symbol: AOR

Issuer headquarters: San Francisco

Offer price: 21.00

Dec. 22 price: 17.75

% change, offer to Dec. 22: --15.5

*

Issuer: EarthShell

Total amount raised, in millions: 277.2

Lead manager: Salomon, CS First Boston

Pricing date: 3/23

Ticker symbol: ERTH

Issuer headquarters: Santa Barbara

Offer price: 21.00

Dec. 22 price: 12.94

% change, offer to Dec. 22: --38.4

*

Issuer: PBOC Holdings

Total amount raised, in millions: 174.2

Lead manager: Sandler, O’Neill & Partners

Pricing date: 5/12

Ticker symbol: PBOC

Issuer headquarters: Los Angeles

Offer price: 13.75

Dec. 22 price: 10.00

% change, offer to Dec. 22: --27.3

*

Issuer: Ticketmaster Online-CitySearch

Total amount raised, in millions: 98.0

Lead manager: NationsBanc Montgomery

Pricing date: 12/2

Ticker symbol: TMCS

Issuer headquarters: Pasadena

Offer price: 14.00

Dec. 22 price: 45.56

% change, offer to Dec. 22: +225.5

*

Issuer: Headlands Mortgage

Total amount raised, in millions: 96.0

Lead manager: NationsBanc Montgomery

Pricing date: 2/4

Ticker symbol: HDLD

Issuer headquarters: Larkspur

Offer price: 12.00

Dec. 22 price: 20.06

% change, offer to Dec. 22: +67.2

*

Issuer: Broadcom

Total amount raised, in millions: 84.0

Lead manager: Morgan Stanley Dean Witter

Pricing date: 4/16

Ticker symbol: BRCM

Issuer headquarters: Irvine

Offer price: 24.00

Dec. 22 price: 119.88

% change, offer to Dec. 22: +399.5

*

Issuer: GeoCities

Total amount raised, in millions: 80.8

Lead manager: Goldman Sachs

Pricing date: 8/10

Ticker symbol: GCTY

Issuer headquarters: Santa Monica

Offer price: 17.00

Dec. 22 price: 39.94

% change, offer to Dec. 22: +134.9

*

Issuer: Aspec Technology

Total amount raised, in millions: 78.0

Lead manager: Hambrecht & Quist

Pricing date: 4/27

Ticker symbol: ASPCE

Issuer headquarters: Sunnyvale

Offer price: 13.00

Dec. 22 price: 1.56

% change, offer to Dec. 22: --88.0

*

Issuer: MIPS Technologies

Total amount raised, in millions: 77.0

Lead manager: Deutsche Bank Securities

Pricing date: 6/29

Ticker symbol: MIPS

Issuer headquarters: Mountain View

Offer price: 14.00

Dec. 22 price: 28.00

% change, offer to Dec. 22: +100.0

The Fall Freeze

1998 was a strong year for IPOs, despite weeks without any deals during the early fall. U.S. offerings and money raised, by month:

(Please see newspaper for full chart information)

Number of U.S. IPOs

December: 22

Money Raised

December: $3.8 billion (through Dec. 22)

*

Source: CommScan

The Top U.S. Underwriters

The leading underwriters and their IPO volume:

*--*

IPO volume, Deals as Rank Manager in billions lead manager 1 Merrill Lynch $9.2 17 2 Morgan Stanley Dean Witter 8.9 23 3 Goldman Sachs 3.3 23 4 Salomon Smith Barney 2.5 19 5 Credit Suisse First Boston 1.7 13 6 Prudential Securities 1.4 12 7 Donaldson, Lufkin & Jenrette 1.2 14 8 Friedman, Billings, Ramsey & Co. 1.0 6 9 BT Alex. Brown 0.9 16 10 Bear Stearns 0.9 14 11 Lehman Bros. 0.8 6 12 BancBoston Robertson Stephens 0.7 16 13 NationsBanc Montgomery 0.7 13 14 Hambrecht & Quist 0.4 9 15 Deutsche Bank Securities 0.3 7

*--*

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Bloomberg News was used in compiling this report.

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Times staff writer Debora Vrana covers investment banking and the securities industry. She can be reached by e-mail at [email protected].