Last week, QuinStreet priced their IPO at $15 per share, far below the hoped for range of $17-$19 per share. The first day of trading held offer price but unfortunately the following day QuinStreet broke its offer price, closing at $14.55. This is not how a healthy IPO market behaves.
QuinStreet has all the qualifications of a company that ought to be well received by institutional investors as an Initial Public Offering. Revenue scale, historical and projected revenue and profit growth, attractive industry sector and proven and highly articulate management. Overall, in our judgment, QuinStreet is a very credible company and a more than worthy IPO candidate. That’s why its lackluster reception is so troubling.
Despite recent high hopes, it now appears fair to conclude that the IPO market is currently troubled. Since the turn of the year, we’ve seen 13 completed and 10 canceled or withdrawn IPOs. As noted on the table below, only 38% of the completed IPOs are trading above their IPO price. These facts will undoubtedly result in a pause in IPO activity until tangible signs of renewed institutional investor interest show themselves.
From an M&A perspective, as we highlighted previously, the tone and activity level of the IPO market is one of a number of important factors influencing M&A activity and valuation levels.
