Tesla, Primerica shine in otherwise weak 2010 IPO market

By Matt Andrejczak
MarketWatch Online, June 30, 2010

Tesla Motors' much-ballyhooed initial public offering is off to a screaming start, hanging onto a 41% gain in its first two days on the market. But it's the exception in what so far has been a rough year for IPOs.

From New Year through June 30, 63 companies have made their market debut, posting an average loss of 8% on their initial share price offer, according to Renaissance Capital, which tracks IPOs. That performance compares with the 7% declines for the Nasdaq (COMP 2,092, 0.00, 0.00%) and S&P 500 Index (SPX 1,023, -4.79, -0.47%).

Of those 63 companies, only 24 are currently trading above their IPO offer price, based on data from advisory service IPO Boutique. Shares of almost all the other stock debutantes are trading below where the stock was first offered to the public.

Companies with some of the worst overall returns, include Cellu Tissue (CLU 7.66, 0.00, 0.00%), a private label paper producer, and Global Geophysical Services (GGS 7.00, +0.14, +2.04%), a provider of seismic data services to oil and gas exploration firms.

Both stocks are down 40% from their offer price.

Primerica (PRI 21.66, 0.00, 0.00%) has been the biggest IPO winner so far. Shares of the former Citigroup life-insurance unit are up 45% since they debuted April 1.

The biggest first-day pop goes to Financial Engines (FNGN 12.60, +0.13, +1.04%). It shares closed up 44% over its IPO offer price and have performed well in the after market. Tesla (TSLA 19.70, +0.50, +2.60%) shares jumped 41% in first-day trading. Goldman Sachs (GS 133.60, +2.52, +1.92%) served as lead underwriter for both IPOs.

Chipmaker MaxLinear (MXL 13.20, -0.08, -0.60%) rose 34% on its debut, while wireless gear maker Meru Networks (MERU 11.77, -0.42, -3.45%) racked up a 28% return. But the euphoria was short lived for Meru. Its shares now trade below their $15 a share offer price.

It's been a turbulent year for IPOs. So far this year, 20 companies have postponed IPOs, or one of every three that have gone public, according to IPO Boutique.

This is because underwriters couldn't drum up enough investor interest or the companies didn't want to sell stock for too cheap. Also, concerns about global economic growth have sparked sharp swings at times in the stock market this year.

On Wednesday, MagnaChip Semiconductor of South Korea pulled its proposed $250 million IPO, while tiny Texas-based oil and gas exploration firm Resaca Exploitation dropped its $68 million stock offering. They cited market conditions, a day after the Dow Jones Industrial Average fell more than 268 points in a single session.

The IPO pipeline is full, with 146 companies waiting in the wings, even a few who have been hanging around since 2007. If the stock market improves, there is a better chance the more attractive deals will be priced by underwriters.

"There are better deals in the pipeline but the companies don't want to cut their offer price," said Scott Sweet, senior managing partner of IPO Boutique in Florida.

He noted Game Fly, an online video-game rental service whose business model is similar to NetFlix, and Green Dot Corp., maker of reloadable prepaid debit cards. Both filed their IPO plans in February. Sequoia Capital is a major investor in both firms.

More IPOs have gone out the door in 2010, already matching the total number last year.