King Digital prices at $22.50, trades as low as $18.90 and closes at $19.00 in its NYSE debut. It broke. Badly.
I told you in my Trader Talk yesterday that the IPO market was holding up well--until yesterday. First-day IPO pop for the 55 IPOs that have gone public this year was up a healthy 22 percent; the after-market pop (the percentage the average IPO has been up since its IPO) was also a solid 29 percent.
Until today. There are several recent IPOs that are showing signs of weakness. A10 Networks (ATEN), which optimizes data center performance, went public last week at $15 and is now trading below its IPO price, at $14.55.
Many other companies that went public last week: Paylocity (PCTY), MediWound (MDWD), Amber Road (AMBR) and Q2 Holdings (QTWO) are trading below their first-day pop. They're still above their initial price, but the IPO after-market premium is shrinking fast.
But the failure of KING (OK, it's not a failure, but it's a big disappointment) is sending a ripple through the IPO community. There's not fear yet, but there is concern.
What you want to look for are two things: Cancellations and repricings. Not seeing cancellations yet, but there is much higher risk of repricings.
There are three IPOs pricing tonight, representing a good cross-section of the IPO market:
- Applied Genetics (AGTC), a biotech company, is pricing 3.6 million shares between $13-$15.
- Square 1 Financial (SQBK), a bank that lenders to venture-backed companies, is pricing 5.9 million shares between $15-$17.
- TriNet Group (TNET), which outsources HR services 15 million shares, is pricing 15 million shares between $15-$17.
If any of them postpone, or any prices below the price talk, that would cause greater concern.
There's an additional five more tomorrow night, including CBS Outdoors and Everyday Health.
By the way, in my opinion, it would be healthy for a small deflation in the IPO market. Not a full-on meltdown, that would only happen if the overall market collapsed. But a gentle de-escalation would be welcome.
-By CNBC's Bob Pisani