IPO Market Remains on 'Life Support': Principal
The initial public offering market remains "on life support," even as it enters what could be its busiest week since November 2007 if all the deals scheduled are completed, one analyst said on Wednesday.
The IPOs scheduled for this week include Zynga, Michael Kors and Jive. Zynga is scheduled to offer 100 million shares between $8.50 and $10 each.
Kathleen Smith, a Renaissance Capital principal, told CNBC that she expected Zynga to price above its range.
“The buyers are in the driver’s seat in the IPO market, except for a handful of maybe hot IPOs, and you can put Zynga in that category,” Smith said. “But the IPO market is pretty much on life support and even though it sounds like this is a wonderful week for IPOs, it has not been a good place to be, from a return standpoint.”
Most of the IPOs, except the high-profile ones, must be priced at great discounts to get them complete, Smith said.
“The market does not work when investors do not make money, and investors have not been making money,” she added.
“So far this year two-thirds of the IPOs that have been priced are trading below their IPO price,” she said. “That’s not a healthy IPO market. So 2012 is going to have to turn into a market where only the very best companies get done at attractive valuations, setting the stage for superior returns for investors.”Additional Views: Should Investors Sell Zynga before IPO?
Kathleen Smith and Renaissance Capital do not have any interests or conflicts in Jive, Michael Kors or Zynga.
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