In the week that LPL Financial (LPLA-Nasdaq) has launched its initial public offering, the financial services IPO market has returned to a position of strength after passing through an unwelcoming summer period when many deals were withdrawn or put on hold.
Indeed, Nov. 2010 could represent the largest dollar value of new-issue equity capital raised in the United States in a single month. LPL's deal is the 128th IPO to price so far this year, which is more than double the 63 IPOs completed for all of 2009, according to data provided by Renaissance Capital, Greenwich, Conn.
“Along with General Motors’ massive $15.8 billion common share offering also announced Wednesday evening, the U.S. IPO market has raised $17.9 billion so far in the month of November, more than doubling the $17 billion raised in the first 10 months of 2010,” Renaissance reported on its website.
Another six IPOs representing almost $1 billion of capital are set to price by week's end, including a $500 million proposed offering from Caesar's Entertainment and a $250 million offering from microelectronics maker Aeroflex.
The LPL deal’s lead underwriters on Wednesday night priced the IPO at $30 per share, at the high end of the original range of $27 to $30. A total of 15.7 million shares were sold, raising $468 million. Goldman, Sachs; Morgan Stanley; Bank of America-Merrill Lynch; and JPMorgan Chase acted as lead managers. LPL began trading on the Nasdaq on Thursday under the symbol LPLA.
Overall, 2010 has been a relatively good year for IPOs in the financial industry, with 21 deals totaling $3.9 billion year to date coming to market. Average first-day return was 8.4% and average total return was 6.0%.
Despite this activity, skeptics say that LPL’s timing was not ideal, and as typically risky IPOs go, it was indeed risky.
“We have decided not to buy LPL shares, and the reason is really simple: we are a shareholder of Schwab and we prefer the Schwab story,” said Tim Cunningham, associate portfolio manager with the Thornburg Core Growth and International Growth funds.