The Year in IPOS

The increasing number of initial public offerings and who they are.

Investors flock, capital flows, and records fall. Initial public offerings are back

The initial public offering window, where humble private businesses sell overvalued slices of ownership to hopeful investors, was shut so tight in early 1991 that it seemed more productive to apply to lenders than to underwriters for financing. In the first three months of 1991 a mere 35 IPOs entered the public market -- a drizzle that, had it continued, would have turned the year into the worst climate for new public companies since 1982.

Fortunately for investment bankers, venture capitalists, and locked-in founders, the pace grew hotter with the weather -- and the stock market. In June alone there were 48 IPOs, and by calendar's end, with the Standard and Poor's 500 stock index up a rare 26%, 1991 had sired 395 public corporations, including 63 purely capital entities, such as mutual funds, financial institutions, and blind pools. While the total lagged behind a couple of brisker years, the dollar amount they raised -- $24.8 billion -- was Wall Street's highest yet, exceeding second-place 1987 by more than half a billion. The average flotation, $42.7 million, also set a new-issue record, asserting that there are plenty of hard-spending risk takers out there, even without a change in the capital-gains tax.

Granted, among the major beneficiaries of the spending spree were more than a dozen leveraged buyouts. These once-public companies had been taken private in the 1980s, when junk bonds were the craze, and were now returning to the public arena with their tails between their legs. More significantly, however, 1991's massive IPO financing trickled substantially into the coffers of small companies, providing even such incomeless operations as biotechnologists and research-and-development outfits with enough patient backing to give profit making the old college try.

Debt-saddled LBOs seeking surcease through a return to the public equity market included huge Owens-Illinois, at $528 million the year's largest IPO; Duracell International, $366 million; and York International, $184 million. Not to be outdone by the Stop & Shop chain's public reappearance with a $170-million offering, two relatively small food dispensers went public for the first time: Smart & Final, a warehouse grocery chain, with a $95-million offering, followed by Super Rite at $32.6 million.

On sale as a factory reject was AnnTaylor Stores, whose since-banished CEO was being paid $2 million a year to oversee the 177 outlets' steady decline. An LBO spun out of Canada's bankrupt Campeau Corp., AnnTaylor marketed its IPO stock better than its fashionable off-the-rack stock: seven and a half months after the successful flotation the price per share had plunged 42%. Retail liquidator Filene's Basement was a similar but far less defective piece of returned merchandise. Freed by way of a public offering from the ham-handed folks upstairs at Federated Department Stores, its stock more than doubled in eight months.

At least part of the difference between the two retailers was that the year's economic frame of mind favored operations that proffered basic goods at basic prices. The frugality of The Basement echoed the turn-of-the-century theme of Montgomery Ward, J. C. Penney, Sears Roebuck, and the like -- all merchandisers that have grown too cumbersome to adapt that theme to the consumer climate at the end of this century. In their place 23 small retailers boldly went public in 1991, many of them delivering double-digit stock-market returns before year end. Among them, Rag Shops (a June IPO) gained 80%; Goody's Family Clothing (October), 77%; and December IPO Sam & Libby returned 36% in only 28 days.

All this -- performed at the core of a shopper meltdown -- added up to 21 apparel-manufacturing and -retailing enterprises going public. Demonstrating how times have changed, only one retail IPO, CompUSA, sells computers. After a decadelong trend that had electronics manufacturers at the front of the parade, not one 1991 new issue makes a computer system.

The year 1991 documents that the repository of speculative capital has pretty much moved from junky garages to antiseptic laboratories. Strongly outpacing the 12% health-industry component of the 1990 gross national product, nearly 30% of the operating-company IPOs were involved with health products, instruments, or delivery. All of the first five IPOs out of 1991's slow-to-open gate are health-related enterprises, as are 110 of the year's 395 IPOs.

Indeed, using only the products of 1991's medical and biological issues, you could just about construct an entire body, adapting such components as Somatogen's blood substitutes, Danek Group's spinal implants, Osteotek's bones, and Mitek Surgical Products bone connectors. If in the end it didn't tick, you could turn to Stewart Enterprises' death-care services.

Of that array of medical and biological entities, four companies concentrate on the betterment of beasts rather than humans. Deprenyl Animal Health, public last March, makes veterinary pharmaceuticals. BallistiVet markets a system to implant pharmaceutical "biobullets" in livestock. A third, Veterinary Centers of America, conducted its dog-and-pony shows in October. Further defining a marketing trend toward the promotion of animals' well-being, the products of bioscience lab Embrex are designed to help raise healthier chickens.

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