Trader Talk

Forget Ferrari. The IPO market has resumed price-cutting frenzy

The IPO market now

I have said all week the Ferrari IPO, which priced at the high end of the price talk, was an anomaly. The IPO market is suffering from a large number of withdrawals and postponements, and those that have priced recently are typically roughly 20 percent below the midpoint of the price talk.

That trend is continuing this morning. Two companies priced overnight, and look what happened.

Multi-Packaging Solutions (MPSX): packaging primarily for consumer and health care products

  • Price talk: 18.75 million shares at $15 to $17
  • Priced at: 16.5 million shares at $13

Dimension Therapeutics: liver disease treatments

  • Price talk: 5.5 million shares at $14 to $16
  • Priced at: $13

And earlier this week, look what happened to American Farmland, a farm REIT that owns property California, Illinois and Florida that began trading on Tuesday:

American Farmland: farmland REIT

  • Price talk: 12 million shares at $8.50 to $10.50
  • Priced at: 6 million shares at $8, opened at $7

Ouch! Not only did all three price below the range expected, but two of them lowered the amount of shares offered!

If you add it all up, here's how much less they raised compared to what they were seeking.

Tough week for IPOs (percent below midpoint of amount sought)

  • Multi-Packaging Solutions: down 28.5 percent
  • Dimension Therapeutics: down 13.3 percent
  • American Farmland: down 58 percent

And remember, we have the biggest IPO of the year that happened last week: First Data. Look how that has fared.

First Data: payment technology solutions

  • Price talk: 160 million shares at $18 to $20
  • Priced at: $16

That, too, priced roughly 16 percent below the midpoint, and is trading in the $15 area.

So where do we go from here? In hiding, to a certain extent. Hibernation. I mean it. There's nothing on the calendar! Oh sure, we have Square,, Ballast Point Brewery, and SoulCycle. And Albertson's was never withdrawn.

But what's clear is the IPO market has changed in the second half of the year. Here's what I see:

  1. Price cuts
  2. Postponements
  3. Slower traffic
  4. Poor after-market returns

Will this change going into the last two months, or will this cycle carry us into the 2016? The hope is that seasonal trends will lift the market enough for many names to get through the door at higher prices.

If the market lifts, you can bet someone will start the ball rolling. There's an old saying in the IPO business: one dog starts barking in the kennel, and the rest of them all start barking as well.


One dog barks in the kennel, and the rest of the dogs start barking.