"Where'd all the IPOs go?"
That's what I was wondering during a walk into the office earlier this week. Can you blame me? From January to July, I was spoiled by companies listing on the NYSE hanging their banners outside and throwing fun parties for me to attend.
Shake Shack (SHAK) parked a truck outside to dish up better burgers to onlookers who knew nothing about the stock market. Bojangles (BOJA) gave out free rolling pins (the company makes biscuits from scratch) to those lucky enough to be near the Nasdaq. Planet Fitness (PLNT) hosted a grandiose workout party in front of the NYSE for its August IPO (best IPO party I have ever seen out front, hands down) that would have made Richard Simmons proud. Tech companies that I know nothing about also went public.
Now things have gone dry as a bone, and that has me worried. Keep this in mind, folks: Execs sitting atop companies with huge valuations and an itch to go public are placing calls with banks and trusted industry friends to gauge the lay of the land before filing for a prospective IPO. Further, companies that have filed for IPOs recently (pre-market turmoil) such as Soulcycle and Neiman Marcus were locked and loaded on going public, but have since gone quiet with respect to actual timing. No doubt this group is being advised by bankers on what to do -- the fact filers haven't gone public during the volatility, in my view, is a signal of a lack of confidence in the equities markets into year's end.
The performance of recent IPOs isn't helping sentiment of prospective filers, or those that have already filed with the SEC. Why go public if your stock is going to be met with limited enthusiasm (see Skinny Pop IPO last month) and negative analyst reports weeks later?
According to IPO research firm Renaissance Capital, year-to-date 131 IPOs have raised $22 billion, 31% fewer offerings than last year. Renaissance Capital believes a pickup in activity into year's end appears unrealistic due to the recent selloff in equities, a still-weak energy sector, uncertainty over U.S. interest rates, trouble in emerging markets and high volatility inherent to September.
I think the key takeaway here is the ultimate sign of confidence may not come from stocks rallying when the Fed lifts rates next week, but when companies take the plunge and re-enter the IPO market. To have a company sit on the sidelines when it knows it needs cash to fund big earnings-driving ideas (and execs could earn a sweet payout), to me, is quite telling as to medium-term underlying sentiment.
Two prospective IPOs I am particularly watching are Neiman Marcus and Petco. These are names you want to try to get involved with if you can (as in you are a wealthy client and have connections). The market is craving new high-end luxury names. Tiffany (TIF) is a flawed company, Nordstrom (JWN) is investing like a madman and depressing its current earnings in the process, and Michael Kors (KORS)/Coach (COH) are no longer true luxury names.
Neiman Marcus could easily be embraced, especially by foreign funds that are keen on luxury products. As for Petco, I think this is one retailer Amazon (AMZN) won't crush 10 to 15 years out. Petco offers critical services and has a viable online business. Also, I think people want to physically see the food they are buying for their pets (which are now seen as humans). (Amazon is part of TheStreet's Growth Seeker portfolio.)
May we never forget that fateful day. Pull your eyes off the phone and make sure to pay your proper respects today. Special shout out to Harley Davidson NYC for their midnight run from Long Island, N.Y., to Ground Zero.
God bless America.