As everyone would expect, deals cratered after the terrorist attacks. But surprisingly, some others are in the market.
By Alison McKiegan
October 2001
Institutional Investor Magazine
Less than two weeks after the terrorist attacks on the World Trade Center and the Pentagon, Allied Capital Corp., a mezzanine and mortgage loan provider, raised $67.5 million in a secondary sale - the first equity offering to go to market since the tragedy.
But Allied was not the only company to sell stock. Thirteen secondary offerings totaling $1.88 billion sold in the two weeks after the market reopened. Clearly, some equity issues can still sell.
That doesn’t mean there was no damage. Many companies postponed or delayed equity offerings. According to research group Dealogic, since September 11 a total of $1.19 billion of expected new equity issues have been canceled with the Securities and Exchange Commission.
Take the slated IPO for ExpressJet, Continental Airlines’ regional carrier: “We’ve postponed the IPO for now,” says Continental spokesman Jeff Awalt. “In light of recent events, it wasn’t the best of times to move.”
But although some first-time equity issuers saw their plans collapse because of the devastation, other offerings looked likely to tank long before the attacks. Terrorism didn’t dry up the IPO market; it has been in a deep slump all year. But the attacks made matters worse: Not a single IPO made it to market in September - the first month that’s happened since September 1975, says Dealogic.
Though WebGain, a software company, canceled its planned IPO on September 20, CFO Steven Brashear says the company had been watching the market and weighing its options long before September 11. “The pulling of the IPO and the timing of the attacks is coincidental, but certainly [the attack] doesn’t make it any easier,” he says.
Brashear says it’s too early to tell how the tragedy will affect prospects for a future IPO. “High tech is going through steep adjustments after the boom we had, and that’s a bigger factor in recovery than the World Trade Center.”
Bruce Ryan, CFO of Global Knowledge, a technology training company, had planned to pull his company’s IPO before September 11; he did so on September 17. “It’s been on hold for a while,” he says. “We’ve been in registration for a year watching the markets, and they’re not where they need to be. We’ll be back when they improve.”
Global Knowledge made its decision to pull out without advice from lead banks Credit Suisse First Boston and Banc of America Securities. “It was our decision, but certainly they weren’t in disagreement,” Ryan says.
“We’ve been advising each client differently depending on the sector and the individual company,” says Jeff Edwards, co-head of global equity markets at Merrill Lynch & Co. The Merrill-led IPO for Nuvera Fuel Cells, a clean-burning fuel processor, was withdrawn in part because of sector weakness. The market had deteriorated long before the WTC disaster.
Edwards believes companies still have a viable equity market. “We were in the market with Allied Capital, and we have other companies doing road shows,” he says.
