|
IPO Deal Negotiation:
IPO Underwriters' Discounts:
Is the 7% Discount Eroding?
10/24/05 – Of the 176 deals completed this year, just 57% were pegged at the “standard” 7% underwriters’ discount. Over a third of this year’s IPOs have enjoyed a reprieve, being able to wrestle a discount below 7% from their underwriters. With the average IPO offer amount this year running around $164 million, any fraction of a percent would save prospective issuers a bundle of proceeds or, conversely, cost investment bankers some significant revenue.
IPO Underwriters’ Discounts
Year-to-Date 2005
|
Underwriters’ Discount |
No. of IPOs |
% of Total |
|
Greater than 7% |
13 |
7.4% |
|
At 7% |
101 |
57.4% |
|
Less than 7% |
62 |
35.2% |
* Jan. 1, 2005 through Oct. 12, 2005
IPO Vital Signs Subscribers see, IPO Vital Sign
#394. IPO Underwriters' Discounts -
Quick Stats on Over 50 IPO Topics
But wait, prospective issuers, don’t chortle yet at the expense of your investment bankers. Although some of 2005’s IPO issuers seem to have had the upper hand in beating down the underwriters’ discount, this year has not been the most favorable to IPO issuers. When the Bubble burst in 2001, issuers had their best chance of gaining a break from the monolithic 7%. In that year, the median discount percentage was 6.4% with over 40% of all issuers that year benefiting from the savings of a reduced discount. It seems investment bankers were just as eager to do deals that year as the thin ranks of prospective issuers, when bankers gave up more in terms of their spread than in any year since at least 1998.
IPO Underwriters’ Discounts
Median &
Percent of IPOs with <7%
Discount by Year
|
Year |
Median Discount |
% of IPOs with <7% |
|
1998 |
7.1% |
20.3% |
|
1999 |
6.9% |
17.7% |
|
2000 |
6.7% |
22.7% |
|
2001 |
6.4% |
40.4% |
|
2002 |
6.5% |
31.5% |
|
2003 |
6.8% |
25.3% |
|
2004 |
6.8% |
28.5% |
|
2005* |
6.7% |
35.2% |
* Jan. 1, 2005 through Oct. 12, 2005
IPO Vital Signs Subscribers see, IPO Vital Sign
#394. IPO Underwriters' Discounts -
Quick Stats on Over 50 IPO Topics
Sharpen Your Pencils: So which investment banks are giving up on their 7% discount this year and which issuers have been the beneficiaries of less than a 7% discount?
Lead Managers
With Five or More IPOs
Underwriters’ Discounts
Year-to-Date 2005
|
Lead Manager |
Tot. of IPOs |
No. of IPOs by Discount Percent |
||||
|
3% or Less |
>3% to 5% |
>5 to <7% |
7% |
>7% |
||
|
Citigroup |
26 |
-- |
4 |
11 |
11 |
-- |
|
Lehman Bros |
23 |
-- |
3 |
10 |
9 |
1 |
|
Merrill Lynch |
22 |
-- |
3 |
6 |
13 |
-- |
|
CSFB |
21 |
-- |
2 |
9 |
10 |
-- |
|
Goldman Sachs |
20 |
-- |
2 |
9 |
9 |
-- |
|
Morgan Stanley |
18 |
-- |
3 |
9 |
6 |
-- |
|
JPMorgan |
17 |
-- |
1 |
7 |
8 |
1 |
|
UBS |
16 |
-- |
-- |
7 |
9 |
-- |
|
Deutsche Bank |
10 |
-- |
2 |
2 |
6 |
-- |
|
EarlyBirdCapital |
10 |
-- |
-- |
2 |
4 |
4 |
|
Banc of America |
9 |
-- |
2 |
2 |
5 |
-- |
|
Jefferies |
9 |
-- |
-- |
3 |
6 |
-- |
|
Bear Stearns |
8 |
-- |
-- |
3 |
5 |
-- |
|
US Bancorp Piper |
8 |
-- |
1 |
-- |
7 |
-- |
|
Friedman Billings |
6 |
-- |
-- |
3 |
3 |
-- |
|
CIBC World Markets |
5 |
-- |
-- |
1 |
4 |
-- |
|
WR Hambrecht |
5 |
1 |
-- |
1 |
3 |
-- |
|
Morgan Joseph |
5 |
-- |
1 |
1 |
3 |
-- |
|
Wachovia |
5 |
-- |
-- |
1 |
4 |
-- |
* Jan. 1, 2005 through Oct. 12, 2005
-- full-credit joint mandates --
IPO Vital Signs Subscribers see, IPO Vital Sign
#863. IPO Underwriters' Discounts (Summary) -
IPO Deal Element Rankings by Lead Manager
Winners and Losers
Of the Discount War:
Five Smallest Discounts of 2005*
|
The Winners: IPO Issuer SIC Code |
Discount |
The Losers: Lead Managers |
|
Morningstar, Inc. 6282 Investment Advice |
2.0% |
WR Hambrecht |
|
JMG Exploration, Inc. 1311 Crude Petroleum & Natural Gas |
3.5% |
Gilford |
|
Ad.Venture Partners, Inc. 6770 Blank Checks |
4.0% |
Wedbush Morgan |
|
PanAmSat Holding Corporation 4899 Communications Services |
4.1% |
Morgan Stanley Citigroup Merrill Lynch |
|
Huntsman Corporation 2800 Chemicals & Allied Products |
4.5% |
Citigroup CSFB Merrill Lynch CIBC Deutsche Bank |
* Jan. 1, 2005 through Oct. 12, 2005
IPO Vital Signs Subscribers see, IPO Vital Sign
#643. IPO Underwriters' Discounts -
IPO Issuer Profiles and the Going Public Process
©
CCH INCORPORATED 2005. IPO Vital Signs includes all U.S. market IPOs,
including REITs and non-U.S. headquartered IPO issuers, except for 1) closed-end
funds; 2) best-efforts, self-underwritten, and direct offerings; and 3) IPOs
filing under form SB-2 with an offering amount of less than $5 million. All fees
are estimated and taken from Part II of the final amendment if not disclosed in
the final prospectus.