(By William Patalon III) In an odd bit of capitalist irony, the U.S. banking crisis could end up as the catalyst that finally jump-starts the long-moribund market for initial public stock offerings (IPOs).
In fact, it already appears to be happening.
U.S. banks - under government order to raise capital as a result of the recently completed bank stress tests, and desperate to shed the onerous shackles of the U.S. Treasury Department’s Troubled Assets Relief Program (TARP) - have been announcing billions in secondary stock offerings in recent days, and experts say many more such deals can be expected.
Anadarko Petroleum Corp. (NYSE: APC), Bank of America Corp. (NYSE: BAC) and Ford Motor Co. (NYSE: F) yesterday (Tuesday) became the latest U.S. companies to pursue new sources of capital, announcing deals that involved offerings of stock or debt, or outright asset sales.
Those announcements came just one day after four of the largest U.S. banks - BB&T Corp. (NYSE: BBT), Capital One Financial Corp. (NYSE: COF), U.S. Bancorp (NYSE: USB) and KeyCorp (NYSE: KEY) - announced plans to raise a combined $6.5 billion through stock offerings. At least some of the money raised will be used to repay the TARP money the federal government injected into troubled U.S. banks.
“All the deal activity sends a clear signal - investors are willing to take more risk,” says Louis Basenese, a longtime expert on the IPO market and editor of The Takeover Trader and White Cap Report newsletters. “And it’s already trickling down into the IPO space. In the next two weeks, four deals are slated, doubling the total volume for 2009.”
When asked if all these deals could end up soaking up all the capital that’s still sitting on the sidelines - blunting, as a result, the rally that’s had stocks surging over the past two months - Basenese said there’s no reason for that to be a concern.
“With $8 trillion-plus on the sidelines, we’ve still got a ways to go before the capital is gone,” Basenese said.
In fact, we may well be just getting started, he says.
“During slowdowns, the IPO space is as lonely as a geek on prom night. But right now, our geek might be getting lucky. Along with the market rally and strong appetite for secondary offerings, we’re seeing IPOs hit the market again,” Basenese said. “This week we get Digital Globe. Next week, OpenTable and SolarWinds are slated to debut. And there are over 100 more in the pipeline to fuel a sustained recovery.”
The Latest Deals
Yesterday’s announcements involved a carmaker, an energy company and a top U.S. bank.
Anadarko, an independent oil-and-gas exploration and production company based in Woodlands, Tex., said yesterday that it priced a public offering of 30 million shares at $45.50 each.
