From an overall market perspective, LPL Financial’s $600 million listing on Friday, June 4, arrives during a period of volatility, with a boomlet of financial services IPOs in the first four months of 2010 followed by a steep fall-off in May.
“This financial offering is a big surprise. The ability to sell stock right now is uncertain, and IPOs are being pulled left and right. More IPOs were pulled in the month of May than in December 2008,” said Richard Bove, a high-profile U.S. banking analyst now with Rochdale Securities in Stamford, Connecticut.
To come with a financial offering now is “gutsy,” Bove said, adding, “I do hope it’s a major success because it will indicate there’s money out there for money-instrument companies.”
Through April 22, 2010, the financial services sector has seen 10 IPO pricings, according to data from Renaissance Capital. This compares to only 11 financial services pricings in all of 2009 and a mere three pricings during the worst of the recession in 2008.
May’s performance aside, if financial services IPOs continue in 2010 as they have over the first four months of the year, they will match the pre-recession levels of pricings in 2007, which saw 29 pricings for the whole year, and 2006, which saw 27. But the current state of the stock market may not cooperate with LPL’s plans or, for that matter, investors’ desire to put their money into IPOs.
“We’re in a correction mode right now. The market has declined 10% to 20% from the S&P 500′s closing high of 1,217 on April 23. We are more than 12% below that level,” said Sam Stovall, S&P Equity Research chief investment strategist.