"Where Best To Invest"-IPO's
Monday, January 15, 2007PAUL KANGAS: The market for initial public offerings heated up in late 2006, and that momentum is expected to continue into this year. Joining me now is Hilary Kramer, our regular street critique guest and personal finance editor at AOL. Hilary welcome back to NIGHTLY BUSINESS REPORT.
HILARY KRAMER, PERSONAL FINANCE EDITOR, AOL.COM: Thank you Paul.
KANGAS: Tell me about the slate of IPOs in this coming year.
KRAMER: This will be an IPO year that we've never seen before. It will be historically high and there will be a tremendous number of technology deals coming through, oil and gas opportunities, as well as of course, the international listings on our market.
KANGAS: Isn't such a hot IPO market an indicator of a market topping out?
KRAMER: That's absolutely right. Just take a look at what happened in 200. That's the last time we had IPOs like this, especially the technology ones and so many pushed to the pipeline and that was the beginning of the end so it does signal a turn in the market.
KANGAS: Will the recent spate of private equity deals play a role in the IPO market this year?
KRAMER: Yes, it will. Paul, these are going to be huge IPOs. We're talking about companies like HCA, Freescale Semiconductor, Equity Office Properties. These are companies that are major big companies that many individual investors will be able to buy into.
KANGAS: What kind of companies would you favor and which ones would you avoid? Is there any rule of thumb there?
KRAMER: I would look for some of the technology companies. We're expecting these 75 technology initial public offerings to come through. We had 55 to 60 come through in 2006 and we have a whole new generation of technology that's coming around the bend that has been in the pipeline over the past six years, so look for them.
KANGAS: We saw a lot of Chinese firms listing on the U.S. markets last year. Do you think that will continue?
KRAMER: That will continue, but don't forget. We're competing with Europe now and Europe is stealing a lot of the Asian IPOs. So we might not see them, but between technology and the large private equity firms, we are going to see more IPOs than you've ever seen before.
KANGAS: Is there any rule of thumb to indicate to a potential buyer of an IPO if the price is fair and likely to go higher or it's overpriced?
KRAMER: Yes. What you want to take a look at is where the IPO has filed. Has it filed at between $13 and $15 and it's going to come out at $14. If you see the price cut down to $9 or $10, it means that the company is having trouble selling itself on the market, so be careful when you get a phone call from a broker saying I have an opportunity for you.
KANGAS: Any other tips you might want to give to our viewers?
KRAMER: Yes, just because these might be big well known names that are coming public doesn't mean that it's going to be a big seller. There can be big failures, even some of the most awaited IPO, for example, Vonage, which came out of the gate and was a total failure. It was overpriced. There were a lot of greedy people looking to make money off of Vonage and in the end, the market will price fairly what out there is going to be a long-term opportunity.
KANGAS: Very good. Hilary as always, thanks for joining us.
KRAMER: Thank you.
KANGAS: My guest, Hilary Kramer, personal finance editor at AOL.
