(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Institutional data from Fidelity, Shorts data from Yahoo! Finance.)
Despite more than 200 initial public offering hopefuls sitting in the pipeline, not a single one went public on the US exchange in September. The news ended the 29-month streak in which at least one IPO hit the market.
Given some background, it seems reasonable that no IPO made the decision to join the market… Two-thirds of 2011′s IPOs are below their initial offering price, leaving many investors who bet on the year’s newest players worse off than most. And given heavy market volatility it has become increasingly difficult for companies to find an appropriate price benchmark.
What’s more, IPO hopefuls are all too aware that investors are not in the mood for the high risks commonly associated with initial offerings. For many, the market is risky enough with the looming European financial crisis and the uncertain future of US markets.
“Things aren’t too much better globally, with just 67 companies managing to price last month. That’s the lowest figure since August 2009, and a massive drop from the December 2010 peak of 210 IPOs. The number of follow-on equity offerings also fell in September, to a 30-month low,” report CNN Money.
The last company to list in the US was Todou.com (TUDO), a Chinese video sharing site. The company offered its stock at $29 per share on August 17. It currently trades at $14.08 per share.
It doesn’t seem likely any IPO hopefuls will be making their debut in the next couple of weeks either. Interestingly, if no IPOs hit the market in October it would mean two straight months without an IPO debut – a streak that last occurred in September of 2008.
These are tough times for IPOs. For some, it could get a whole lot tougher over the coming weeks.
The following list of recent IPOs have been dumped by institutional investors during the current quarter. In addition, all of these recent IPOs have seen a significant increase in shares shorted over the last month (i.e. an increase in bets that the company’s shares will decline).
Sophisticated investors, like hedge funds and short sellers, think these recent IPOs are in deep trouble. Do you agree?
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1. E-Commerce China Dangdang Inc. (DANG): Operates as a business-to-consumer e-commerce company in the People's Republic of China. IPO occurred on 08-Dec-2010. Net institutional sales in the current quarter at -2.0M shares, which represents about 6.22% of the company's float of 32.13M shares. Shares shorted have increased from 8.66M to 9.34M over the last month, an increase which represents about 2.12% of the company's float of 32.13M shares.
2. Daqo New Energy Corp. (DQ): Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon in China. IPO occurred on 07-Oct-2010. Net institutional sales in the current quarter at -1.1M shares, which represents about 11.02% of the company's float of 9.98M shares. Shares shorted have increased from 443.77K to 607.57K over the last month, an increase which represents about 1.64% of the company's float of 9.98M shares.
3. Gevo, Inc. (GEVO): Focuses on the development and commercialization of alternatives to petroleum-based products based on isobutanol produced from renewable feedstocks. IPO occurred on 09-Feb-2011. Net institutional sales in the current quarter at -260.5K shares, which represents about 3.56% of the company's float of 7.32M shares. Shares shorted have increased from 1.27M to 1.42M over the last month, an increase which represents about 2.05% of the company's float of 7.32M shares.