This is the "worst market crisis in 60 years," says George Soros.
"We have not seen a nationwide decline in housing like this since the Great Depression," said the President of Wells Fargo & Co. in December 2007.
So, how can you be shocked when $21.4 billion worth of IPOs are shelved since the first of the year?
You can’t be… It’s ugly out there.
It was January 2008 when BG Medicine, a developer of diagnostic tests for heart disease and cancer, pulled plans to IPO. Here was company that could reportedly identify the molecular clues pinpointing patient risk for arterial plaque, for example, that couldn’t pique enough investor interest.
Sure, it was surprising, given the sex appeal of the life sciences market, but not totally unexpected. BG Medicine is yet another victim of the global credit crunch that’s sealed and shelved the IPOs of six other drug or device maker companies since November 2007, on top of another 61 shelved offering plans.
That’s been since November. In 2008 alone, we’ve already seen $21.4 billion of offering plans shelved. And it’s only March.
For an idea of just how bad the U.S. IPO market has become, here’s a partial list of IPO withdrawals listed on IPOHome.com.
- Medical device maker Transoma Medical withdraws IPO 2/21/2008
- Mobile phone data services provider Danger withdraws IPO 2/20/2008
- Coated paper manufacturer NewPage Holding withdraws IPO 2/15/2008
- Medical device company Concentric Medical withdraws IPO 2/15/2008
- Health services company Critical Homecare Solutions withdraws IPO 2/14/2008
- Forum Oilfield Technologies withdraws IPO 2/11/2008
- Communication services company McLeodUSA withdraws IPO 2/11/2008
- Plains GP Holdings L.P. withdraws IPO 2/11/2008
- Cancer treatment developer Light Sciences Oncology withdraws IPO 2/8/2008
- Specialty coffee retailer Tully’s Coffee withdraws IPO 2/7/2008
- Biotechnology company Archemix withdraws IPO 2/6/2008
- Biopharmaceutical company Biolex Therapeutics withdraws IPO 2/1/2008
- Independent oil and natural gas producer Chaparral Energy withdraws IPO 1/30/2008
- Online real estate services company Iggys House withdraws IPO 1/23/2008
- Life sciences company BGMedicine withdraws IPO 1/23/2008
- Natural gas services company CDM Resource Partners withdraws IPO 1/23/2008
- Fingerprinting device manufacturer Cross Match withdraws IPO 1/16/2008
- Oil and natural gas producer Exco Partners LP withdraws IPO 1/14/2008
- Biodiesel producer Imperium Renewables withdraws IPO 1/3/2008
IPO Market: Visa
Given IPO conditions, it says a lot that Visa will IPO as strong. But that’s because there’s heavy demand for its product. As we said in our Visa IPO: Profit from the Biggest IPO in U.S. History article, "Visa is a card processor, not a lender. That means it doesn’t have to worry about cardholder debt. Like MasterCard, it makes its money from the transaction fees. It doesn’t have to worry about an 11.3% increase in credit card debt, or the tumultuous charge-offs, payment delays and higher delinquencies."
They’re benefiting as revolving credit has risen more than 11%, as of November 2007, as compared to the 6.1% of 2006 and the 3.1% of 2005. And, they’re benefiting as credit card debt ballooned to $790 billion, rising at a "rate four times higher than earlier in the decade," says the Center for American Progress.
Despite an unstable global credit market, demand for credit remains high, too, in emerging economies such as Asia and in the Middle East. And, consider this. If Visa and the underwriters don’t get greedy in pricing the IPO, shares of the company could make for a great hedge against credit burdens.
Ian L. Cooper
P.S. Small Cap Trading Pit is compiling its "Recession-Proof Your Portfolio" report on the six stocks to own today. It’ll be ready soon. Stay tuned.