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Testing the IPO waters
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July 29, 1996: 5:04 p.m. ET
Four companies hope recognition will help them weather rough market
From Correspondent Rhonda Schaffler
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NEW YORK (CNNfn) - The current market for initial public offerings is the weakest it has been this year.
Despite the weakness, four companies are expected to test the waters this week with initial public offerings. They're hoping brand name recognition will allow them to succeed in a market where success now has a whole new meaning.
This week, companies that sell everything from jeans to bagels to golf will go public.
Internationally-known clothing maker Guess Inc. will offer 9.2 million shares; catalog company Chadwicks of Boston, 9.3 million shares; Einstein Noah Bagel Corp., 2.2 million shares; and Golden Bear Golf -- which runs golf centers owned by golfing legend Jack Nicklaus -- will offer 1.8 million shares.
Manish Shah, publisher of IPO Maven, said the timing of the offerings couldn't be worse.
"It's the most unfortunate timing. Why now? Nobody understands it. They've just done a lot of work in preparing the corporation to go public. It's at the point now where they've spent all this time and money and the thinking is, 'why not just get it over with?,'" he said.
The shaky IPO market prompted more than two dozen companies to postpone their offerings over the past month. But the companies going public this week are considered good candidates to shine in the lackluster market, said Ryan Jacob, director of research for IPO Value Monitor. (122K WAV) or (122K AIFF)
Although companies with familiar names and products stand a good chance of doing well regardless of the market conditions, there's a new, updated definition for "doing well."
During the first half of the year, an IPO was called successful if it was priced above the expected offering range -- which 30 percent of the new issues were.
This week's IPOs should be priced within the expected range. That's considered doing well now since nearly half of the recent IPOs have been priced below range.
While the current crop of brand name companies might spark investor interest on the first day of trading, analysts say it will be difficult for these stocks to hold onto their gains. All IPOs lost 35 percent of their value in July alone.
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