IPOs all wet as tidal wave of new offerings loom
Over the last two days, initial public offerings (IPOs) have hit a speed bump--again. The market has absorbed more disappointing pricings ahead of what promises to be a huge week.
Pipe maker Advanced Drainage Systems priced 14.5 million shares at $16.00, well below the price talk of $17—$19; biotech firm Ocular Therapeutics priced 5.0 million share at $13.00, well below the price talk of $14—$16. Orion Engineered Carbons (OEC), a maker of carbon black, priced 19.5 million shares at $18, way below the price talk of $21—$24.
However, El Pollo Loco priced 7.1 million shares at $15.00, the high end of the price talk of $13—$15. This is in the hot fast-casual restaurant space, a space Chipotle has inhabited successfully.
Of the 8 IPOs that have priced in the past 36 hours, 6 have priced below the price talk, 1 at the low end of the price talk, and 1 at the high end. That is a disappointment.
The disappointment presages what is shaping up to be a monster week for IPOs. There are 22 companies looking to raise $6.6 billion, and half of that money is one company: Synchrony (CYK). The firm seeking to raise 125 million shares at $23—$26. Do the math here: that's a $3 billion deal! The average IPO is $100—$200 million.
This is the old GE Capital. They're only floating a small part of it (15 percent) but even that part is huge. It's a huge consumer finance company, the largest provider of private label credit cards in the U.S. But beware: they are planning to spin off the rest of it in 2015, so a LOT of stock will be coming in the next year.
And, of course, the usual plethora of biotech.
Why are banks dumping a HUGE pile of IPOs in a week where maybe 40 percent of the Street is on vacation? Because they can. I'm not being flippant: the object is to get stuff out the door while the market is still strong.
--By CNBC's Bob Pisani