Chill grips market and fewer new issues are ventured
The deep freeze that has immobilized the nation has also hit the new issues market this January. So far this year there have been no major new issues.
By way of contrast, there were 13 new issues by the first two weeks of January last year. Investment bankers specializing in new public offerings are hoping this isn't a harbinger of the year ahead.
''So far the market's been a little soft,'' agrees George Quist, a partner at Hambrecht & Quist, a San Francisco brokerage house that specializes in new public offerings. But he quickly adds, ''The quality companies will continue to get a good acceptance.
Robert Towbin, a partner at L. F. Rothschild, Unterberg, Towbin, an investment banking-brokerage house, points out that the main reason the new-issues market has gotten off to a slow start has been the weak stock market. ''If you have a good stock market,'' explains Mr. Towbin, ''you have a good new-issues market.'' If the market firms up this week, he expects some companies whose stock is in registration will go public.
Certainly, there are a lot of companies with the dream of going public. According to Meredith Young, editor of Going Public: The IPO Reporter, a Philadelphia-based information services company, there are 229 companies that have initial public offerings in registration with the Securities and Exchange Commission (SEC). Last year at this time there were 150 companies in registration. ''This is an indication people are still interested in going public even while the stock market is somewhat depressed,'' says Ms. Young.
A lot of these companies, in fact, may have been influenced by last year's successes. According to the IPO Reporter, some 448 companies went public for the first time last year, raising $3,215,008,907. It was the best year for raising capital in the new-issues market since 1969.
However, the new-issues market was rocked by the collapse of John Muir & Co., an investment banking firm that was underwriting a lot of start-ups and companies without any record of earnings. In addition, Muir was hurt by problems in the penny stock market in Denver.
The collapse of Muir, says Mr. Towbin, probably has made investors a little more selective. ''Maybe they're reading the prospectuses now,'' he states.
In spite of its problems, some observers believe the new-issues market in 1982 will bubble again. Norman G. Fosback, editor of a newsletter called ''New Issues,'' says ''We're bullish on 1982.'' The new-issues market, he says, will perform well, taking its cue from the stock market. Mr. Fosback believes the Standard & Poor's 500 will rise 30 percent in 1982, and the new-issues market will expand even more. The shiny spots will be in the high technology areas and the energy-related penny stocks, he believes.
Mr. Quist, however, doesn't agree with Mr. Fosback. This year, ''There will be no roaring new-issue market again'' he states. Instead, he believes ''investors will be looking for companies with predictable earnings growth, some history to support it, and a market environment for its products that is positive.'' The future of the new-issues market, he says, ''will depend on the clarity of the vision of our total economy. We have to get the uncertainty out of people's eyes.''
There is little doubt that investors wishing to buy a new issue this year will have little trouble: There are some very, very large deals in the works. For example, V. Bouvard Supply Company, which manufactures equipment for oil and gas companies, has registered with the SEC to sell 2.350 million shares of the company at a price of $17-$22 a share. Last year the company's sales topped $1 billion. And Americana Hotels & Realty hopes to raise $95 million through a new issue later this month.
High technology will also be represented. A genetic-research company, Collaborative Research, plans a $28.5 million offering. And Hambrecht & Quist hopes to raise $10.2 million for Technology for Communications International. Kidder, Peabody, and Hambrecht hope to sell 762,000 shares of LTX Corporation at about $20 per share. LTX manufactures systems to test integrated circuits.
According to Mr. Fosback, these three high-technology offerings are the most interesting he has seen so far.
One new issue investors won't see right away is De Lorean Motors Holding Company. The issue, which has been postponed twice, was part of the company's attempt to raise some desperately needed capital. However, Mr. Fosback, in his December issue told his readers, the underwriting was a classic example of ''go public or go broke.'' Even though Mr. Fosback felt the offering price of $12 per share was too high for the company, he recommended investors buy both a De Lorean car (for $25,000) and some of the stock. That way if the company went under, the investor would make money on the car since it would become a collector's item.
The stock market's slide continued last week as investors worried about rising short-term interest rates and falling corporate profits. For the week, the Dow Jones industrial average dropped another 18.93 points, closing at 847.60 .
AT&T stock, bolstered by its antitrust ruling, ran against the tide and closed with a gain. IBM also was stronger as the government dropped its antitrust case against the giant computermaker. On Friday IBM released its fourth-quarter and year-end earnings. As expected, both dropped.