Friday, August 11, 2006

PEWeek Dan: 2006 VC/PE IPOs vs Non-VC/PE IPOs… So far

If you don't know Dan Primack... You should. He writes a daily email newsletter, PE Week Wire, for Venture Economics (a Thomson Financial company). In addition to Dan's witty and insightful commentary (which is good enough on its own to warrant our attention), the daily newsletter covers the following sections:

  • VC Deals

  • Buyout Deals

  • PE-Backed IPOs

  • PE Exits

  • PE-Backed M&A

  • Firm & Fund News

  • Human Resources

You can subscribe to PE Week Wire email here - FREE (not really offered, to the best of my knowledge, as a full feed via RSS because they want you to see the ads). Tell Dan I sent you. Ask about the old Pontiac. :-). Read this newsletter before you read the front page of the Wall Street Journal each morning.

Dan is one of the good ones.

Anyway, I just wanted to quote a couple comments Dan made this week comparing the performance of VC- and LBO-backed IPOs in 2006 compared to the performance of Non-VC/Non-LBO IPOs in 2006. This week. On Wednesday, he says:
*** I wrote that public market investors are becoming wary of LBO-backed IPOs. Some of you asked for evidence. So… Thomson Financial reports that the average aftermarket performance for all 2006 IPOs was -2% as of market close Monday. The average LBO-backed IPO, on the other hand, was down -2.06 percent. Admittedly not much of a difference, but LBO-backed offerings are supposed to outperform the overall public markets, not slightly under-perform.

*** An anonymous tipster suggested the following: “Take a look at IPO stock performance by different funds. Just to pick on one, companies Bain has IPO'd have performed above the average IPO performance. Similar patterns for many other top-tier funds.”

Ok, I looked. And you’re incorrect. Bain Capital has priced ten IPOs since the beginning of 2002 (I picked 2002 because it’s post-bubble). Nine of them are still trading, with one ( having been acquired by eBay. The average aftermarket performance of the nine is 9.6%, or 10.31% if you include the sale price. Overall, however, average aftermarket performance for IPOs over the same time period has been 32.8 percent. And so that you don’t think I’m picking on Bain, the situation is even worse for fellow HCA buyer KKR. Its average IPO aftermarket performance since 2002 has been 5.53%, or 10.3% if you include the sale price of PanAmSat.

While today (Friday), he says:
*** Earlier this week, I noted that LBO-backed IPOs in 2006 are performing worse in the aftermarket than IPOs at large. Some asked if the same is true of VC-backed IPOs. The answer is yes, and it’s more pronounced. You can find specifics in Monday’s issue of PE Week, but here is a basic explanation: The public markets are becoming increasingly risk averse, particularly for new companies. The best-performing IPOs in 2006 are in sectors like retail and industrials, whereas the worst-performing are in telecom and healthcare. It is in this latter sandbox that most VCs play – linke Vonage and Iomai -- and they are paying the price so far this year.

Now, the public markets of late have been a somewhat ugly place. Even so, the stats are the stats. Thanks, Dan. Keep up the good work.

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  1. [...] I’ve introduced you to Dan and PE Week before. peHUB will be must-read for the VC/PE community as well. Congratulations, Dan. I look forward to the conversations! [...]

  2. [...] I’ve introduced you to Dan and PE Week before. peHUB will be must-read for the VC/PE community as well. Congratulations, Dan. I look forward to the conversations! [...]


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