The Day Ahead: Mixed bag for IPO quiet period pops

Quiet period expiration more of a whimper than a bang
Written by Larry Dignan, Contributor

That old quiet period expiration pop just isn't what it used to be. After 25-days underwriters of an initial public offering predictably roll out their buy ratings. With a slew of IPO quiet period expirations in the next few weeks, we'll get to see how much weight the underwriters actually carry.

In the last week, the results have been mixed. The most notable quiet period expiration was Avici Systems, a networking company that's up more than 300 percent from its late July IPO. Underwriters JP Morgan and UBS Warburg dutifully carried out their buy ratings, but Lehman Brothers started Avici with a neutral.

Although Lehman thinks Avici is a fine company, analyst Mark Sue said the potential is already reflected in the stock. Avici shares fell 8 percent last Tuesday. What Sue said wasn't exactly news -- any fool could see that a little profit taking wouldn't hurt. Nevertheless, we commend Lehman for an independent research team. Lehman has a fun bunch of analysts -- remember their bond analyst whacking Amazon.com with a refreshingly blunt report?

At the very least, we're sure Sue got a good night's sleep with his rating.

Another company that didn't get its quiet period pop is Corvis, a fibre optic firm. Corvis jumped 135 percent on its first day of trading and has held up well. Investors are enthusiastic, but not stupid. Six of Corvis' underwriters started coverage with buy ratings, but shares barely budged.

Resonate and GigaNet also remained flat after its underwriters started coverage early this week.

Of course, the quiet period expiration pop still works occasionally.

Take a gander at Evoke Communications (Nasdaq: EVOK), a Webcasting software vendor. Evoke went public at $8 last month and basically flopped as shares got stuck in the $5 range.

All Evoke's problems, however, apparently disappeared as four underwriters started coverage with buy ratings. The stock doubled in just a few days and broke the $10 barrier for awhile.

"We believe that Evoke's early offering of a scalable, feature-rich integrated solution gives the company a strong competitive position," said Robertson Stephens.

Maybe it's Evoke's $3.16m in pro forma sales and a loss of $25m for the quarter ending 31 March, but I'm not feeling the love here.

Wanna bet where Evoke shares will settle? It's hard to believe that all the things that made Evoke an IPO to avoid a month ago disappeared as soon as the underwriters started yapping.

Other IPOs saw modest pops as their quiet periods expired. SpeechWorks International initially jumped 7 percent Monday as did Floware Wireless. Both stocks lost steam by the end of trading.

These recent quiet period expirations were just the beginning. Let's see what happens when the underwriters start hyping the likes iAsiaWorks and ScreamingMedia.com, both of which are trading below their IPO prices.

Both companies will get coverage any minute now.

Will these downtrodden stocks suddenly look better when the quiet periods expire? Anything is possible in a week when most investors are on vacation.

On 5 September, AOL Latin America could get a pop. Salomon Smith Barney, Donaldson, Lufkin & Jenrette, Lehman Brothers and Prudential Securities are likely to tell you how the AOL brand will make a go of it in Latin America. Nevermind the light revenue, the free ISPs and the crowded market.

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