Nasdaq slump puts damper on IPOs
| • | Quick fixes won't revive stock market |
| • | Asset allocation can enrich ailing stock portfolio |
| • | Investors search for market's bottom |
Bloomberg News
NEW YORK — Loudcloud Inc.'s initial public offering last week was seen as a market bellwether.
Instead of signaling an opening for new, money-losing Web companies, Loudcloud's IPO has shown the door remains shut.
The Internet consulting firm, backed by Web pioneer Marc Andreessen, slumped nearly 26 percent from its IPO price to $4.44 on Friday as its underwriters Goldman, Sachs & Co. and Morgan Stanley Dean Witter & Co. stopped supporting the stock.
"Loudcloud was a big bullseye sitting up there," said Steven Tuen, manager of the Kinetics Internet Emerging Growth Fund. "People wanted it to work but the truth of the matter is that no one's looking for high-risk exposure."
Loudcloud is among a slew of stocks that have fallen below their offering price in step with a slump in the Nasdaq Composite Index.
Of the 15 U.S. companies that have gone public this year, 13 are under water. SureBeam Corp., the food pasteurization unit of Titan Corp., joined the list Friday as it slumped 14 percent below its IPO price in its debut.
Performances like those of Loudcloud and SureBeam are keeping investors wary of buying new stocks. It also gives them more ammunition to drive down the value of companies pressing ahead with IPO plans.
"It's a buyer's market," Tuen said. "With such a heavy emphasis on valuations, it's a matter of companies leaving something on the table."
Agere Systems Inc., for example, has scheduled its $6.5 billion IPO for Wednesday.
Investors say the microelectronics unit of Lucent Technologies Inc. will have to cut its asking price of $12 to $14 a share before they'll buy.
"It looks like it will have to be lower," said Giri Devulapally, an analyst at T. Rowe Price Group Inc. Some investors are talking of prices as low as $8.
Other companies are scrapping their sales.
Nextel International Inc. decided against pursuing a sale as investors balked at buying stock at its asking price of $10 to $12.
About 300 companies have abandoned IPO plans since the Nasdaq began its descent March 10 last year.
It's dropped 63 percent since.
The Bloomberg IPO index, which contains stocks of companies that went public in the past 12 months, has fallen 70 percent.
