An IPO Decoder for 2012

John Fitzgibbon |

stock marketWith the end of the year appearing on the horizon, financial gurus will start gazing into their crystal balls and making predictions. But let’s take a look at reality.

Even though Wall Street talks of the coming year, in reality, its mindset is a three-month period – last month, this month and next.

As an example of its short-sightedness, look no further than the recent headlines blaring that more than 200,000 jobs have been lost in the financial services sector and more losses are to come. In reality, when things like this happen, it is usually at the bottom of a cycle.

Flip back to 2008 when about 175,000 Wall Street jobs were lost. That turned out to be the bottom of the cycle. If anything, the “For Hire” signs should have been hanging out. The stock market came roaring back in 2009.

Thinking Like a Banker

Now let’s turn our attention to the 2012 IPO market. No matter what you hear, the IPO market, in reality, has an even shorter life cycle than the stock market’s three-month span. For IPOs, the cycle is a three-week period – last week, this week and next.

Consider: How many times does one see an IPO calendar reaching deeper into the future than this week and next?

There are reasons.

When a company files to go public, it states a dollar amount. Then nothing happens for awhile. As time dribbles by, there’ll be a few more amended filings. Once the bankers think stock market conditions are ready, they will file pricing terms announcing the number of shares to be offered and an expected price range.

And that’s the key to the action coming off the IPO calendar. Simultaneously with the filing, the road show will be launched and its pricing date will be announced. The latter is usually about two weeks away.

The determining factor for the timing of IPOs is simple: It’s that variable known as “stock market conditions.” When the stock market goes up, the IPO calendar kicks into gear. When the market falls, the calendar dries up.

A Classic Example

This year’s stock market hit its high at the end of April and then took a 5 and 1/2-month meltdown that ran into early October. The IPO calendar carried into April and May and priced 43 deals, according to the U.S. Securities and Exchange Commission filings. These were the two busiest back-to-back months of the year.

As the stock market was sliding toward its 2011 low in early October, the IPO calendar went dry. It remained dry in September and October, when only two deals were priced. These were the slowest back-to-back months of the year.

Anticipating Zynga

The stock market picked up in early October shortly after the year’s low was touched. It had a good run into mid-November. The November IPO calendar turned out 17 deals.

And hot names started surfacing as coming IPO attractions. They are Zynga and Facebook.

The Zynga IPO is expected on Friday, Dec. 16. The guessing is that the Facebook IPO will surface sometime in early 2012. These names will keep the IPO news alive and open the doors for other companies looking to go public - depending on market conditions, of course.

Never Underestimate Politics

Seasoned investors know that an election year is not just interesting – it can actually mean an improvement in “stock market conditions.”

In reality, 2012 is an election year. All political parties want to see a better economy and a good stock market. If they get what they want, it should spill over into the IPO calendar.

Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
BBT.P.G BB&T Corporation Depositary Shares Representing 1/ 26.03 0.11 0.42 10,058


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