No Business Goes Public in September

Initial public offerings, already slowed by the tech washout and the economic slowdown, came to a complete halt in September--the first month since December 1975 that there were no IPOs, according to Thomson Financial Securities Data.

At one time, at least 13 companies had been slated to go public in September, which would have made it the second-strongest IPO month this year, according to an analysis by IPO Monitor. The slowing economy and the typical post-Labor Day lull whittled down that number to nine companies by Sept. 7.

The upheaval in the financial markets after the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon reduced the September number to zero. And only eight are on the calendar for October.

“The IPO market is the worst it’s been in a quarter century,” said Richard Peterson, market strategist for Thomson Financial Securities Data, who tracks the IPO market.

“A handful of those [pending] deals may get done, but the IPO market for the most part will take a back seat to the broader market,” he said, adding that most investors are still too skittish to look at new issues.

Among the deals scheduled for a September bow were Universal Hospital Services Inc., a Bloomington, Minn.-based company that rents and sells movable and disposable medical equipment to health-care providers, and Given Imaging of Israel, which has developed a wireless imaging system for internal medical use.

Others included San Jose-based LogicVision Inc., which provides technology used in making semiconductors, and ExpressJet Holdings Inc., the commuter carrier unit of Continental Airlines Inc.

The ExpressJet deal, in which the company hoped to raise $320 million, is listed as “postponed” with no IPO date specified. LogicVision, which is seeking $50 million, is set for sometime this month. Given Imaging was scheduled to debut this week.

Dave Dovenberg, chief executive of Universal Hospital Services, said he’s going to restart his “road show,” when the company is presented to potential investors, on Tuesday.

Dovenberg was in midtown Manhattan on Sept. 11, speaking with institutional investors. He had an appointment in Tower 2 of the World Trade Center that afternoon.

“Sept. 11 has just created turmoil,” Dovenberg said, explaining his company’s decision to hold off on an offering until this month. “You have to wait until the institutional investors have had a chance to sort things out.”

In addition to the deals that have been postponed, six companies applied to the Securities and Exchange Commission after Sept. 11 to withdraw their offerings.

Officials at most of those firms said the decision to pull out was made well before the tragic attacks and were because of the faltering economy.

“We were ready to go out in January, but the market took a bad spin,” said Bruce Ryan, chief financial officer of Cary, N.C.-based Global Knowledge Inc., which does information technology training and withdrew its proposal Sept. 17. “So we had been waiting, hanging on.”

Like other executives who have withdrawn their IPO proposals, Ryan said the hoped-for improvement in the overall stock market never came.

Executives at firms that have withdrawn their IPO proposals said they will either postpone expansion plans or seek funding from private investors.

Even without the attacks, the 2001 IPO market has been a mere shadow of 1999-2000. The tragedy just made the numbers worse. In contrast, in September of last year there were 25 deals with an average initial return of more than 40%, and in September 1999 there were 40 deals with an average return of more than 76%, according to a database compiled by Jay Ritter, a professor of finance at the University of Florida.

The terrorist attacks, analysts said, added a massive dose of uncertainty to an already uncertain environment.

“Historical experience shows that as soon as there is volatility in the IPO market, an IPO becomes a luxury component to investors,” said David Menlow, president of the IPO Financial Network.

Analysts said nervous investors first will make a “flight to quality,” looking for companies with a proven earnings track record, and then will look for deals in specific segments, notably health-related issues and the financial sector.

Of the eight deals listed on the October calendar, five are in those categories. The travel and tourism sectors were described by analysts as nonstarters.

Dovenberg said he’s not nervous about making his Wall Street debut so soon after September’s financial market upheaval. And when he travels from the Midwest to the West Coast and then east, he plans to fly.

“We think it’s time to go back on the road again,” Dovenberg said. “Certainly, in the past few weeks an IPO has been a secondary concern to us and the rest of the market. We’ve waited an appropriate length of time and now we’re settling down to whatever is going to become business as usual.

“Somebody’s gotta be out there first.”