Even with leading stock market indexes resting at 2006 lows, Wall Street’s investment bankers are planning an ambitious week for the IPO calendar. They are hoping to price six deals.

Normally a weak stock market wouldn’t be conducive to a snappy new-issues calendar, but there’s one noteworthy item among this week’s offerings. It is VeraSun Energy, a Brookings, South Dakota-based ethanol producer.

The IPO professionals rate the deal very highly, and it’s on everybody’s “most wanted” list.

Timing is everything on Wall Street. And with crude oil prices above $70 a barrel, the buzz in the marketplace is about alternative energy sources. Ethanol, a clean-burning fuel made from corn, sugar cane, or wood, is one of those alternatives.

This week, VeraSun becomes the first ethanol producer to walk down the IPO runway. This is significant, and here’s why.

For a new industrial sector to get on the IPO calendar, bankers must go with a leader from that sector. After all, if the best can’t make it, then who can?

If the deal is successful (i.e., a good pop in the aftermarket), you can expect its top competitors to line up to go public. That’s Stage One in the evolution of an IPO sector.

Stage Two begins when the second-tier companies start going public. Next, the third-tier companies hit the IPO calendar. If there is any aftermarket juice left in these deals, the traffic continues to run until the latter-day IPOs start flopping.

VeraSun Energy plans to price 18.25 million shares at $21 to $22 each to raise $392.4 million. The company will offer 11 million shares and selling shareholders will offer 7.25 million shares.The IPO is to start trading on Wednesday.

The company uses corn to make fuel-grade ethanol, which is blended with gasoline. It owns and operates two of the largest ethanol production facilities in the United States. Its facilities have a combined ethanol production capacity of 230 million gallons per year (MMGY), which represents about 5 percent of the total U.S. ethanol production capacity, according to the Renewable Fuels Association, a national trade association for the U.S. ethanol industry.

VeraSun expects to operate three facilities with an aggregate production capacity of 340 MMGY by the end of August 2007 and five facilities with an aggregate production capacity of 560 MMGY by the end of the first quarter of 2008.

In the first quarter, VeraSun Energy said its net income grew to $2.7 million, on net sales of $109.9 million, from a net income of $1.7 million on net sales of $44.7 million a year earlier. Formed in 2001, VeraSun Energy has about 160 employees.

VeraSun Energy

Underwriters: Morgan Stanley and Lehman Brothers are the joint-lead managers. Acting as a co-manager is A.G. Edwards. Selected Principal Shareholders: Bluestem Funds, Eos Funds, Teachers Insurance and Annuity Association of America and Capitaline Renewable Energy. 52-Week Percentage Change: Dow Jones U.S. Specialty Chemical Index, up 12.7 percent; Nasdaq Composite Index, up 3.3 percent.

As noted earlier, if the VeraSun deal performs well in the aftermarket, it could give birth to a new IPO sector. Let’s flip back into the IPO history book for an example of the evolution of a sector.

The Dot-Com Sector

In September 1998, eBay priced its IPO. It was an Internet deal and the company went public in a weak stock market. For that matter, the stock market was so weak in the fall of 1998 that the eBay deal was one of only three IPOs to be priced during September, according to available reports.

eBay

The Stock Market:

On September 23, 1998, the date that eBay’s IPO was priced, the Nasdaq Composite Index closed at 1,760, down 12.6 percent from 2,014, its then-1998 closing high set on July 20. The Nasdaq Composite continued to slide to its year’s low of 1,419 on October 8. That was down 29.5 percent from its previous closing high.

The IPO from a New Sector:

On that same day, eBay offered 3.5 million shares at $18 each. The IPO opened the next day at $53.50 and closed its opening day at $47.38, up 163.2 percent from its initial offering price. Since then, eBay has split its stock four times. That makes its adjusted offering price $0.75 per share. On Thursday, eBay closed at $31.22 per share, now up 4,063 percent from its initial offering price.

The seeds of a new IPO sector had been planted.

Down to EarthWeb

On November 10, EarthWeb offered 2.1 million shares at $14 each. The IPO closed the next day at $48.69 per share, up 247.8 percent from its initial offering price.

On November 12, TheGlobe.com offered 3.1 million shares at $9 each. The next day, the IPO opened at $90 per share and closed its opening day at $6.50, up 605.6 percent from its initial offering price. That was the sharpest opening-day gain by any U.S. IPO ever.

Voila! The floodgates opened for the insanity-dot-com era. The rest is history, and it ran until the spring of 2000.

Now back to the present.

It is too early to predict the outcome for the ethanol IPO sector. The first—VeraSun—has yet to be priced. Nevertheless, there are already two more ethanol producers in the pipeline. They are Aventive Renewable Energy, based in Pekin, Illinois; and Hawkeye Holdings, based in Iowa Falls, Iowa. No pricing terms or pricing dates have been set.

Inside this Week’s IPO Calendar

There are six new faces at this week’s IPO window.

In addition to the ethanol producer VeraSun Energy, the current offerings include a computer programming service company, Synchronoss Technologies; a golf club specialty retailer, Golfsmith International; a medical device maker, Volcano; a semiconductor company, Verigy Pte; and a wire and cable company, Houston Wire & Cable.

The six deals are expected to raise about $888.2 million.

Golfsmith International Holdings is an Austin, Texas-based specialty retailer operating 55 stores offering golf equipment, apparel and accessories. In addition to its stores, the company sells its merchandise through catalog sales and on the Internet. Golfsmith International plans to price 6 million shares at $14 to $16 each to raise $90 million. The IPO is to start trading on Friday.

For the three months ending April 1, Golfsmith International reported a net loss of $869,000 on revenues of $74.8 million, compared with a net loss of $2 million on revenues of $64 million for the same period a year ago. As of April 1, 2006, Golfsmith International reported a pro forma accumulated deficit of $20.7 million. Formed in 1967, Golfsmith International has about 800 full-time employees and about 530 part-time employees.

Underwriters: Merrill Lynch and JPMorgan are the joint-lead managers. Acting as co-manager is Lazard Capital Markets. Selected Principal Shareholders: Atlantic Equity Partners. 52-Week Percentage Change: Dow Jones U.S. Specialty Retailers Index, up 5.51 percent; Nasdaq Composite Index, up 3.29 percent.

Selected Principal Shareholders:

Houston Wire & Cable is a Houston-based supplier of specialty wire and cable and related services to about 2,600 customers in the electrical distribution market. Houston Wire & Cable plans to price 8.5 million shares at $12 to $14 each to raise $110.5 million. The company will offer 4.25 million shares and selling shareholders will offer 4.25 million shares.The IPO is to start trading on Thursday.

In the first quarter, Houston Wire & Cable reported net income of $4.8 million on sales of $66.4 million, compared with net income of $2 million on sales of $43.1 million for the same period a year ago. Formed in 1975, Houston Wire & Cable has about 274 employees.

Houston Wire & Cable

Underwriters: William Blair and Robert W. Baird are the joint-lead managers. Acting as co-manager is BB&T Capital Markets. Selected Principal Shareholders: Code, Hennessy & Simmons II, L.P.

52-Week Percentage Change: Dow Jones U.S. Business Support Index, up 14.5 percent;

Nasdaq Composite Index, up 3.29 percent.

Synchronoss Technologies is a Bridgewater, New Jersey-based provider of e-commerce transaction management solutions to the communications services market. Among the industrial segments that Synchronoss targets are VoIP, wireline and other markets. Among its customers are Cingular Wireless, Vonage Holdings, Cablevision Systems, Level 3 Communications, Verizon Business, Clearwire, 360networks, Time Warner Cable, Comcast and AT&T. Synchronoss Technologies plans to price 7.6 million shares at $9 to $11 each to raise $76 million. The IPO is to start trading on Thursday.

In the first quarter, Synchronoss Technologies reported net income of $1.5 million on net revenues of $15.7 million, compared with net income of $1.7 million on net revenues of $11.4 million for the same period a year ago. Formed in 2000, Synchronoss Technologies has about 134 employees.

Synchronoss Technologies

Underwriters: Goldman Sachs and Deutsche Bank are the joint-lead managers. Acting as a co-manager is Thomas Weisel Partners. Selected Principal Shareholders: ABS Ventures, Vertek, Rosewood Capital, and Ascent Venture Partners. 52-Week Percentage Change: Dow Jones U.S. Software Index, down 6.66 percent; Nasdaq Composite Index, up 3.29 percent.

Goldman SachsSelected Principal Shareholders:

Verigy Pte is a Singapore-based designer of advanced test systems and solutions for the semiconductor industry. The company’s 93000 Series platform was designed to test System-on-a-Chip, System-in-a-Package and high-speed memory devices, and its Versatest V5000 Series platform was designed to test memory devices, including flash memory and multi-chip packages.

The company is a wholly owned subsidiary of Agilent Technologies. After the offering, Agilent will own about 50 million ordinary shares, or about 85.5 percent of the outstanding ordinary shares.

Agilent Technologies

Verigy Pte plans to price 8.5 million shares at $16 to $18 each to raise $144.5 million. The IPO is to start trading on Wednesday.

For the three months ending January 31, Verigy Pte reported a net loss of $16 million on total revenues of $170 million, compared with a net loss of $45 million on total revenues of $79 million for the same period a year ago. Formed in 2006, Verigy has about 1,558 employees.

Verigy

Underwriters: Goldman Sachs and Credit Suisse are the joint-lead managers. Acting as co-managers are Cowen and Thomas Weisel Partners. Selected Principal Shareholders: Agilent Technologies. 52-Week Percentage Change: Dow Jones U.S. Semiconductor Index, down 5.71 percent; Nasdaq Composite Index, up 3.29 percent.

Selected Principal Shareholders: Agilent Technologies.

Volcano is a Rancho Cordova, California-based developer of a broad suite of intravascular ultrasound and functional measurement products, which enhances the diagnosis and treatment of vascular and structural heart disease. Volcano plans to price 6.8 million shares at $10 to $12 each to raise $74.8 million. The IPO is to start trading on Thursday.

For the three months ending March 31, Volcano reported a net loss of $3.8 million on revenues of $19.9 million, compared with a net loss of $6.4 million on revenues of $16.5 million for the same period a year ago. As of March 31, Volcano reported an accumulated deficit of $61.8 million.

Volcano

Formed in 2000, Volcano has about 489 employees.

Volcano

Underwriters: JPMorgan and Piper Jaffray are the joint-lead managers. Acting as co-managers are Bear Stearns and Cowen. Selected Principal Shareholders: Orbimed Advisors, Domain Associates, FFC Partners and FFC Executive Partners, Johnson & Johnson Development, and MedtronicBakkenResearchCenter. 52-Week Percentage Change: Dow Jones U.S. Medical Supplies Index, down 2.74 percent; Nasdaq Composite Index, up 3.29 percent.

Contact the writer:Editorial@RedHerring.com