What firm, over the last week, had an 89% pop on its first day of trading? Hint – it is located close to, but is not in Silicon Valley. The answer is Annie’s Inc., the maker of organic and natural foods such as bunny-shaped crackers. Annie's is based Berkeley, CA and trades as BNNY on the NYSE. That’s a hella hop, I mean pop, for an IPO (Initial Public Offering). The sun definitely rose today for Annie’s and its investors. Credit Suisse Group AG (CSGN) and JP Morgan Chase & Co. (JPM) led the IPO. www.annies.com
(March 29 addendum - BNNYwent up another $2.00 or 5.57% on day 2 of trading.)
The above is in direct contrast to a number of firms over the last couple of months who had relatively small pops in comparison. The Facebook announcement that they would be going public sucked the air out of a number of IPO’s. Unlike.
Was the IPO underpriced? In a story in the WSJ - “The Art of the IPO”, “It's a fine line. Price your shares too high, and you'll collect a lot of money. But the subsequent drop may alienate investors and demoralize your employees. Price them too low and you'll grab plenty of headlines as your stock soars on takeoff, but you've failed to raise nearly as much as you could have, and the initial buying frenzy may end up costing you some long-term investors.”
According to Cully Davis at Credit Suisse Group, "An IPO is a brand-new investment for an investor, so the notion of having some upside built into the IPO price to engage with the investor is important," The upside expected by investors in an IPO varies, but generally ranges from about 10% to 20% according to Davis. The phrase, “leaving money on the table” seems to be occurring less and less frequently as the press looks for these large pops. Improper pricing, failure to have enough shares available on the opening day, and investor exuberance all play a role, as well.
Globally, IPO activity in Q1 of this year, is actually down over last year. So far, in the first quarter, 157 deals have raised $14.3 billion, with only one of those deals raising more than $1 billion, according to data released by Ernst & Young on Thursday. $46.6 billion was raised via 296 deals in the first three months of 2011. This has been the lowest quarter for IPO activity since Q2 2009.
Thirty-two companies have gone public on U.S. exchanges so far in Q1 , raising $4.8 billion. Eleven of these were tech firms. Of course, the $100 billion dollar gorilla, Facebook, is supposed to be coming out in the near future. This IPO, by itself, will dwarf the value of IPO’s in any recent quarter. To see a list of the Q1 IPO activity, go to