I Just Hope This Marks the IPO Top

 | Mar 27, 2014 | 7:12 AM EDT  | Comments
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They were all around me, these silly characters. They paraded onto the floor of the New York Stock Exchange yesterday, and they might as well have worn Cole Porter signs that said, "We're the top!"  Because they sure were, at least for the cohort that is the endless parade of initial public offerings.

Rarely have I ever seen an accident waiting to happen as I did with the deal for Candy Crush maker King Digital (KING). I don't blame management, either. As I said to the CEO Riccardo Zacconi: Look, your banker did you a real disservice. I compared the story positively with Zynga (ZNGA) just a week ago and I had high hopes that, if the deal were priced right, money could be made.

But after the declines in the IPOs from last week -- and they are all down horrendously -- it's suddenly a changed world. It had to be obvious to the banker that you had to price this one at the lower end of the $20-to-$22 range. They ran the books. They had to have had an advanced peek.

That is why I told Zacconi to go tell the investment banker, "Thanks for nothing, you clown." There are few things more damaging for a company's image than a broken deal.

On paper the deal made sense, because the company is profitable. It was not Zynga. It makes money and it has a decent price-to-earnings multiple. But the fact is, this market could not handle a $7 billion deal. It might have been able to do so even 10 days ago, before all of this merchandise came, again -- though only if it were at the low end of the range. I have to tell you, when you are in the thick of things on Post Nine in the New York Stock Exchange, it's clear as day that this one "didn't have the votes."

What should they have done? Well, in the lead-in to the deal, they could have kept the price lower in order to see if they could attract more buyers. Then they could have slowly walked it up -- but not to nearly as high a level as they did, because there was obviously no demand whatsoever at $22. You have to wonder either how they could be so wrong, or so stiff-necked, as to not be willing to use the lower end of the $20-to-$22 range.

As I said before the stock opened, why did this deal have to come at all? Why did they have to bring it? Why now? Why not in December, when the conversions for paying customers were still going higher?

Of course, the CEO wouldn't go there and answer my questions about how this could be so botched. They never do. Probably under some instructions by some lawyer to say nothing.

But this was, indeed, the deal too far, and it did shoe the saturation and ennui out there for deals.

Is it really the top? My hope is that it is, for the underwritings. There's too much stock, too many new companies and too many stocks that went to outrageous premiums and are now floating back to earth -- or, soon, under the print price.

But you know the bankers won't quit yet. That's not their way. More to come, but maybe just not as visibly bad as Candy Crush -- whose creator, alas, could have debuted well if it weren't for greed.

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