Firms Delay IPOs Amid Stock Market Volatility

NEW YORK—Last week’s severe stock market volatility has scared away several companies eyeing potential initial public offerings (IPO) last week.

Eight companies seeking IPOs last week decided to cancel or delay their offering plans, according to IPO market research firm IPO Boutique.

The Dow Jones Industrial Average swung wildly last week, alternating between large collapses and equally dramatic rallies, as investors’ mood seesawed between panick over the European sovereign debt crisis and a double-dip recession, to being reassured by positive jobs reports.

Such shift in stock prices is a perilous market environment for IPOs to take off. The eight companies canceling their IPOs last week included HomeStreet, WageWorks, WhiteGlove Health, and Cathay Industrial Biotech.

This is a reversal in trend from earlier this year, when technology companies raced to market, sending their IPOs to massive first-day gains and in turn rewarding their early investors. In May, professional networking site LinkedIn saw its shares jump by more than 109 percent on its first day of trading, and in July, real estate information site Zillow soared 79 percent on its debut.

But two firms that did issue their IPOs last week—Carbonite and SandRidge Permian Trust—had to do so with smaller valuations and much lower expectations.

Carbonite (Nasdaq: CARB), an online data backup and management firm, went public on Wednesday and raised $62.5 million, by selling shares priced at $10 per share. It was drastically lower than the $106 million the firm hoped to raise a few weeks ago. However, it saw its shares rise at week’s end, closing at $13 per share last Friday afternoon.

SandRidge, which is a trust for SandRidge Energy Inc., priced below its IPO range at $18 per share. The company, which will trade under the symbol “PER” on the New York Stock Exchange, also reduced the size of its stock offering.

Shares Rise Modestly

The stock market finished last Friday on a surprisingly subdued note, as the Dow Jones Industrial Average gained 125 points. The week ended with two consecutive days of gains.

The Dow finished Friday up 1.1 percent, while the S&P 500 Index gained 6 points, or 0.5 percent. The Nasdaq Composite Index increased by 15.3 points, or 0.6 percent.

Last week was historic in terms of market swings—it was the first time in Dow Jones history where the blue chip index saw four straight shifts of more than 400 points. At one point during the past week, yields on U.S. treasury notes hit their all-time lows, and gold briefly topped more than $1,800 per ounce in a flight to safety. The CBOE Volatility Index, or the market’s "fear gauge," swung wildly.

It began with a U.S. debt downgrade and concerns over the European banking sector, and a perceived risk for a second global recession. Investors reacted frantically to every news item and rumor floated by analysts.

But by the end of the week, positive unemployment news, solid retail sales, and better-than-expected corporate earnings prevailed.

The U.S. Department of Commerce Friday morning released its July retail sales figures, which were positive across the board. Retail and food sales climbed 0.5 percent from June. Gas stations and Internet retailers reported the biggest jump in sales.

“The ex-gasoline numbers are probably a better reflection of the overall state of the economy than the total numbers, but both are telling a pretty similar story,” wrote Zacks analyst Dirk van Dijk in a note. “Things are getting better, but slowly,” he said.

The stock market gains made in the United States mirrored higher markets across the Atlantic in Europe, where shares received a boost from a temporary ban on short selling of bank shares.