Seagate's IPO survival lifts Wall Street mood
By Matt Krantz
USA Today
NEW YORK — Wall Street welcomed its biggest tech stock offering in nearly two years yesterday, raising hopes that investors are warming up to IPOs again.
Seagate Technology, the No. 1 maker of computer hard-disk drives, sold 72.5 million shares at $12 each, raising $870 million. While a pittance compared with IPOs during the boom, it still impressed some investors.
"Just being able to get ...(a tech IPO) done is a major feat for the marketplace," says William Smith, president of Renaissance Capital.
The slowdown in the IPO market has hit historic proportions. Only 77 IPOs have been completed this year, making it the slowest year since 1979, says Richard Peterson, strategist at Thomson Financial. Seagate is just one of 21 tech IPOs to get done this year, another 23-year low.
Analysts say Seagate offers reasons for optimism in:
• Improving valuations. Seagate's debut valued it at $4.9 billion. That's more than twice what investors paid to take the company private in November 2000.
• Increasing deal flow. Seagate comes just four days after the IPO of the Chicago Mercantile Exchange, which closed yesterday at 29 percent above its $35 IPO price.
Then there is the fact the stock market has been rebounding for two months, lifting the Standard & Poor's 500 index 17 percent and the Nasdaq composite 25 percent from their Oct. 9 lows. IPOs tend to recover three to six months after the broader market.
Skeptics say Seagate also showed that the IPO market still could take a while to fully mend, especially for tech companies:
• Investors didn't clamor to buy Seagate. In the first day of trading, shares fell 47 cents to $11.53, below its already lowered $12-a-share offer price. That made Seagate the 19th IPO this year to close below its offering price on the first day of trading, says Romesh Patel, analyst at IPO tracker Dealogic.
• Seagate's actual market value might be far lower than $4.9 billion, because 83 percent of the company's shares still have not been sold to the public, says Irv DeGraw at Falcon Capital. And investors who took the company private were among those cashing out in the IPO.
