|
Death of an old friend?
|
 |
October 28, 2000: 2:23 p.m. ET
The IPO market loses trusted ally to volatility, replacement sought
|
NEW YORK (CNNfn) - The initial public offering market lost its most dependable friend last week, but there may be an energetic replacement waiting in the wings.
Networking companies, and specifically optical networking companies, have been the darlings of the IPO market. Many stocks in the sector have seen large first-day gains this year, and even if they failed to soar on their debut, a good return over time was almost always a given.
But now, those days may be gone, analysts said. Volatility last week in the optical networking sector's bellwether stocks is bad news for companies hoping to make a splash on Wall Street.
Check out upcoming IPOs here
"The sector we could count on is getting slaughtered," said Ben Holmes, president of IPOPros.com.
Still, in their quest for a new, stable provider of solid returns, IPO investors have tapped a new love-affair, this time with alternative energy companies which, many find, are brimming with potential.
Heating a chilly market
Indeed, analysts said Friday the alternative to the optical networking sector may also be the alternative to oil and gas. Alternative energy companies have slowly crept up as a favorite with investors.
As such, many expect solar energy firm Evergreen Solar Inc. could heat up the market with its small offering. The company hopes to raise a modest $42 million, pricing 3 million shares between $13 and $15.
"This is one that rides on enthusiasm," said Irv DeGraw, research director at WorldFinanceNet.com.
IPOPros.com's Holmes said volatile energy prices have played a part in boosting similar offerings, as well as the fact that more people are moving to rural areas.
"People are moving off the power grid and need these type of companies," Holmes said.
 Evergreen will trade as "ESLR" on the Nasdaq, and the deal is led by Banc of America Securities LLC.
Sector trends are not the only factors in determining the success of an IPO, however, and DeGraw said there is no substitute for breakthrough technology.
Transmeta Corp. makes hardware and software for portable computers, and the jewel in its crown is a new microprocessor called Crusoe.
"They are sitting right on the edge with their new generation chip," DeGraw said. "Every Intel hater is supporting them, so they will have a lot of support."
Analysts said the buzz on the Street about this deal is high and a "moonshot" – when the stock doubles in price on the first day of trading – is possible.
Led by Morgan Stanley Dean Witter, Transmeta is looking to raise about $156 million, selling 13 million shares between $11 and $13 and will trade as "TMTA" on the Nasdaq.
But outside of these two issues, the IPO market will resemble more of a ghost town during the upcoming week as underwriters buckle down and wait for the storm clouds to pass from Wall Street.
After watching just six deals raise $331 million last week, investors won't see more than seven deals this week, set to raise $579.4 million, according to research company CommScan, a New York-based research firm.
An optical glitch
Continuing last week's trend, Optical Communication Products will feel the brunt of the attitude shift this week.
The company specializes in high-speed, high-performance optical networks and its sound financials would normally make the deal would a barn burner, but Holmes said he has to hedge on the size of the blaze.
"They're a good-looking company, they make a ton of money, but the group is so suddenly out of favor," he said.
The company had revenues of more than $36 million in 1999 and earned more than $7 million.
Chatsworth, Calif.-based Optical plans to raise $115.5 million, selling 10.5 million shares between $10 and $12. Led by UBS Warburg, it will trade as "OCPI" on the Nasdaq. 
|
|
|
CNNfn's IPO calendar
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
