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Looking at technology, and far beyond, bankers priced 202 IPOs during 2005 and raised $35 billion.

But those broad numbers don’t tell the whole story. For example, here are the numbers for an “average” 2005 IPO:

·          Dollar amount raised per deal: $173.3 million

·          Average offering price per deal: $14.92 per share

·          Average closing price per deal: $17.02 per share

·          Average opening-day gain per share: 14.08 percent

And then there’s the question of how offerings performed on their opening days:

·          Closed above their initial offering prices: 135

·          Closed below their initial offering prices: 42

·          Closed unchanged from their initial offering prices: 25

Details like those give you a better sense of the health of the market. But it gets even more interesting when you take a look at the performance of three categories of this year’s IPOs—those priced below their original ranges, those priced within, and those priced above.

IPOs Priced Below Range

Of the 202 IPOs priced in 2005, 69 were offered below their original filing price ranges. Bankers were forced to reduce the offering terms to meet a poor investor demand. Their opening-day performance reflected the lack of interest.

Here were their opening-day performances:

·          Number of IPOs priced below original range: 69

·          Closed above their initial offering prices: 32

·          Closed below their initial offering prices: 23

·          Closed unchanged from their initial offering prices: 14

·          Average opening-day gain: 1.17 percent

·          Average opening-day gain for all 2005 IPOs: 14.08 percent

The best performance was by Electro-Optical Sciences, an Irvington, New York-based medical device company developing instruments to assist in the diagnosis of melanoma. It priced 4 million shares at $5 each on October 28. The stock closed its opening day at $7.71 per share, up 54.2 percent from its initial offering price. The stock finished the year at $5.45 on Friday.

The worst performance came from Vimcro International, a Beijing, China-based fabless designer of multimedia processors for PC cameras and mobile phones, which priced 8.7 million shares at $10 each on November 14. The stock closed its opening day at $8.36 per share, down 16.4 percent from its initial offering price. The stock closed at $9.25 per share on Friday.

IPOs Priced Within Range

Of the 202 IPOs priced in 2005, 65 were offered within their original filing price ranges.

Here were their opening-day performances:

·          Number of IPOs priced within original range: 65

·          Closed above their initial offering prices: 43

·          Closed below their initial offering prices: 13

·          Closed unchanged from their initial offering prices: 9

·          Average opening-day gain: 6.55 percent

·          Average opening-day gain for all 2005 IPOs: 14.08 percent

The best in this group was Brookdale Senior Living, a Chicago-based operator of senior living facilities. It priced 11.1 million shares at $18 each on November 21. The stock closed its opening day at $25.43 per share, up 41.3 percent from its initial offering price. The stock closed at $30.03 per share on Friday.

The worst: Directed Electronics, a Vista, California-based designer of vehicle security and convenience systems and a supplier of home and car audio, mobile video, and satellite radio products. It priced 9.4 million shares at $15 each on December 15. The stock closed its opening day at $14 per share, down 12.5 percent from its initial offering price. The stock closed at $14.05 per share on Friday.

IPOs Priced Above Range

Of the 202 IPOs priced in 2005, 68 were offered above their original filing price ranges. Bankers were forced to increase the offering terms to meet a large interest from investors. Their opening-day gains reflected the strong interest.

Here were their opening-day performances:

·          Number of IPOs priced above original range: 68

·          Closed above their initial offering prices: 60

·          Closed below their initial offering prices: 6

·          Closed unchanged from their initial offering prices: 2

·          Average opening-day gain: 27.65 percent

·          Average opening-day gain for all 2005 IPOs: 14.08 percent

The best was Baidu.com, a Beijing-based Internet search engine, which priced 4 million shares at $27 each on August 4. The stock closed its opening day at $122.54 per share, up 353.9 percent from its initial offering price. The stock closed at $63.65 per share on the last trading day of the year.

The worst was Stealth Gas, an Athens-based provider of international seaborne transportation services to liquefied petroleum gas producers and users, which priced 8 million shares at $14.50 each on October 5. The stock closed its opening day at $13.80 per share, down 4.83 percent from its initial offering price. The stock closed at $12.27 on Friday.

The Lesson from IPO Investing 101:

If a deal is priced below its original filing range, look for a lackluster opening-day performance.

If a deal is priced above its original filing range, look for a better-than-average opening-day performance.

Sneak Preview of 2006

Now let’s hear what the experts have to say about 2006 IPO market.

Linda Killian, the portfolio manager of IPO Plus Aftermarket Fund, said, “For 2006, we think there will be more growth stocks. There’ll be fewer asset plays. There are a lot of companies on the calendar that’ll probably fall by the wayside, a lot of the biotechs. There were several at the end of the year that didn’t get done.”

Richard Peterson, a market strategist with Thomson Financial, said, “Looking into 2006, I think you could have a strong year. There is something like 130 or so deals in registration, with proceeds north of $20-plus billion.

“There will be some foreign deals that’ll get priced here,” he added. “You can have some of the private equity deals that happened in 2004 that’ll get repackaged as an IPO in 2006 and you probably will continue to have the big push in financials, energy, defense-related technology, and security software.”

Mr. Peterson concluded, “If I had to look into my crystal ball, I’d say 2006 would be a better year than 2005.”