Business Insight Zone

That’s what I talked about this week with Matt Krantz of USA Today . . .

IPOs find struggling market a tough go for new stocks

. . . and Emily Thornton of Bloomberg/BusinessWeek . . .

Blackstone IPOs Show Barriers to Returning Fund Cash

Here’s my take on the IPO market in a nutshell:

• It has lost some momentum since the 4th quarter of 2009. There’s still plenty of time in February for both filings and actual market debuts to pick up, but filings peaked in December and debuts were fewer in December and January than they were in September, October, or November.
• Most of the offerings coming to market are small — less than $250 million.
• We’ve seen more downward re-pricings and delayed offerings for IPO aspirants. (Lynn Cowan of Dow Jones covers these like a hawk.)
• The weather for IPOs seems to have gotten worse as the broader stock markets have slid this year.
• In general, it seems that investors are grappling with a new IPO pricing calculus growing out of (a) a slow, uneven, and jobless recovery; (b) a lower tolerance for risk among investors; and (c) an unwillingness by investors to stomach debt-laden balance sheets from private-equity owned IPO aspirants. (For more on the last point, see this item from the New York Times DealBook.)

For all the specifics of filings, debuts, pricing, and so on, check out Hoover’s IPO Central.

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Related posts:

• 22 Jan. 2010 — My thoughts on the IPO market.
• 6 Nov. 2009 — The IPO drumbeat continues.
• 20 Sept. 2009 — More of my IPO opinions, in long and short form.
• 24 Aug. 2009 — Increased volume and average value of IPO filings in Q3.

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Photo by Bruce Tuten.

Or at least some of them, are available in this USA Today story by Matt Krantz:

IPO market making noise again, but sell-off slows recovery

As the headline suggests, the IPO market would probably benefit from more of a bullish streak in the stock markets as a whole.

My take-home lessons, in brief:

• The IPO market remains much healthier than it was a year ago.
• It would benefit from a better flow of filings, and especially filings for offerings worth $500 million and above.
• The IPO recovery has been well distributed across industries, and there’s no reason to think that won’t continue.
• There’s been a mix of IPO debutants based in the U.S. and based elsewhere, which is also likely to continue. (It’s particularly interesting to note the assortment of IPO filers headquartered in China.)
• The IPO market thrives on overall market stability, even when the economy is down. The recent string of little slides in the NYSE and NASDAQ could disrupt the impression of stability and raise worries among IPO aspirants and their underwriters, thereby chilling the environment for offerings.
• The next IPO bubble is still nowhere in sight.

That’s how I see it for now.

This post is prompted by a headline that’s innocuous enough in itself:

US new housing figures disappoint

I’ll spare you another rant about how little we should rely on economists’ projections at this point. My point here is to encourage you not to use — and not to feel — words like “disappointed” when you think about the current state of the economy.

I wish the economy were better. I wish more new jobs were being created. I’m just as ready as you are — and as the BBC headline writers are — for the financial picture to get rosier.

Meanwhile, though, I’ve got a job to do. I can do it better if I have an accurate clinical understanding of what’s going on in the economy. Words have meaning, though, and words like “disappoint” don’t help the cause of clinical understanding.

Think of a scientist working in her lab: She WANTS the experiment to work. She would LOVE for the findings to verify her potentially groundbreaking hypothesis. She HOPES for a good outcome.

But then when the results don’t match her expectation, she doesn’t let herself get disappointed — or, at the very least, she doesn’t allow herself to stay disappointed. Because now she’s got work to do to determine what happened, and to figure out what she might try next. She moves forward based on the data, not her feelings.

We’re human. Feelings are an inescapable part of business, and they are often a beneficial part of business. But please, don’t let your feelings about the economy — be they ever so grim — cloud your scientific judgment about what your business needs next.

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Photo by Arwen Abendstern.

Are we in a recovery? Is the recession over? Maybe. But in line with what I’ve said before, it pays to be cautious — and to run your business as though things won’t be back to what we think of as “normal” for a long time to come.

That’s been my view for a long time, but my trawl through the business front page of Google News this morning reinforced that idea. That page contains headlines on 20 topics. Here, in order, are the 20 top headlines from this morning. Everything that speaks to the economy is bolded, with positive news in green and negative news in red:

• US Stocks Drop on GE, Bank of America Results, Consumer Data (Bloomberg)
• US EARNINGS WRAP: GE Profit Down 42%; Bank Of America In Red (WSJ)
• Rising Loan Losses Pull Bank of America To Q3 Loss (WSJ)
• Consumer sentiment pulls back in Oct. (MarketWatch)
• Industrial output grows the most in four years (MarketWatch)
• Florida unemployment rate highest in 24 years (Bizjournals.com)
• IBM Drops After Bookings Show Clients Slow to Spend (Bloomberg)
• Google ready to open wallet again after stellar 3Q (AP)
• European Exports Decline 5.8%, Most in Seven Months (Bloomberg)
• Halliburton’s Profit Falls 61% (WSJ)
• Sony Ericsson Sees Improving Markets – CEO (WSJ)
• Estee Lauder sees 1Q results higher than expected (Forbes)
• Mattel 3Q Earnings Fall 3.5% On Sales Decline (WSJ)
• Goldman Sachs sets aside $16.8 billion for bonuses (BloggingStocks)
• Walmart.com cuts prices on yet-to-be-released books (Reuters)
• Nokia Says Finance Chief Rick Simonson to Head Low-End Mobiles After Loss (Bloomberg)
• GE, bofa Weigh on Stocks (WSJ)
• Dollar gains against most rivals, but slips versus pound (MarketWatch)
• MGIC Posts Ninth Straight Loss as Defaults Hit Record (Bloomberg)
• UPDATE 1-First Horizon posts narrower-than-expected Q3 loss (Reuters)

The point isn’t that bad news outweighs good — this is hardly a scientific sample, and anyway GE’s and Bank of America’s lackluster results show up under four different headings.

No, the point is that we’re living in an economic world in which U.S. industrial output can grow the most in four years . . . AND Florida has its worst unemployment rate since the mid-1980s. It’s a world in which companies as different as Halliburton and Mattel decline . . . AND Sony Ericsson and Goldman rise.

This economy is not just one thing, and it doesn’t make sense to boil it down to one word, whether the word is “recession” or “recovery.”

This economy is many things, and for many of us it is going to be what we make of it.

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Related posts:

• How worked up should I get over financial headlines?
• Innumeracy in financial reporting?
• “I want you to have expected it.”
• What if the economic world has changed?

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It’s this:

Dow surpasses 10,000 mark for 26th time

Sure, having the Dow at 10,000 is better than having it below 8,000, like it was in April.

But let’s not get ahead of ourselves, eh?

“Flat is the new up.”

In this economy, I’ve been hearing plenty of statements like that — acknowledgements that during the recession (and in the possibly jobless recovery that could follow it), we’re facing a longish while of no-growth or slow-growth markets. In that context, keeping your revenues flat could be seen as a victory, however hollow it might feel to those of us used to growing the top line year after year.

But one thing I’m also hearing from the ambitious businesspeople I know is that they’re committed to growing somehow, even if growing top-line revenue isn’t an option. They’re just looking to other metrics like these:

• gross margin
• net margin
• average selling price
• number of customers
• revenue per employee
• profit per employee
• . . .

Top-line growth is a good thing. In many cases, it might be the best thing. But it’s not the only thing. And if top-line growth is out of reach — heck, even when it shrinks — there are still lots of ways you can grow your business.

If you’ll pursue these alternate avenues for growth while your competition struggles or hunkers down, you’ll be primed and ready to grow every which way, revenue included, as we find our way back to greener economic pastures.

What are you doing to grow YOUR business in ways besides top-line revenue?

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Photo by Ginny, used under a CC-Share Alike license.

As he spells out in this great post, he’s been through recessions before and knows whereof he speaks:

There’s Light at the End of the Tunnel — But It Isn’t the Time to Celebrate

A sample:

Most of us won’t see an uptick in business for some time to come. Others may already be seeing signs of increased business. Either way, now is not the time to relax.

Those of us whose markets aren’t in the process of turning — that’s most of us — must continue to aggressively work to generate business. Our survival depends on it. We are still in survival mode. If we let up, we risk more than just losing ground, we risk putting ourselves in a position where we cannot recover.

Those lucky few of us whose markets already appear to be in recovery cannot afford to relax either. Now is the time to continue to push. Your competitors are feeling the same urge to take a bit of a break after a hard run. They also feel that they deserve — and need — some down time. Let them have it while you aggressively go after the little bit of new business that is coming into your market. Take this time to expand your sales business while your competitors are sitting back congratulating themselves for having survived.

Read the whole thing. His views and mine on the economy and what to do about it seem to align exactly.

We’re not out the woods yet. Keep pushing.

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Related posts:

• “I want you to have expected it.”
• How close to the center of the target are you?
• What if the economic world has changed?
• Readings: “Collateral Damage.”

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See this picture? Sherman Tan was nice enough to under a share it on Flickr under a Creative Commons attribution license, which means that you and I can use it so long as we give Sherman credit. (Good etiquette implies linking back to the Flickr page for the photo.)

Here’s what I’m thinking: this economy has put a lot of people in the “break glass in case of emergency mindset.” I’d love to see how other business bloggers (or bloggers in general) would riff on Sherman’s photo in posts of their own.

So, join me, won’t you? Take the photo above (you can copy it in a larger size from Flickr, crop it as you please, etc.) and write a “Break Glass” post. Please include a link back to this post, or let me know on Twitter, and I’ll be sure to see your post.

I’m eager to see what you come up with!

Today I was joking with my boss that I could give this blog over entirely to:

1. Updates about doings at Hoover’s, e.g. new product offerings or celebrating successes of Hooverites;
2. Talking about Twitter; and
3. Ranting about the state of financial journalism in this country.

I’m kidding. Mostly.

Here’s my teeth-grinder du jour, from Bloomberg:

U.S. Durable Goods Orders Rise Excluding Cars, Planes

Orders for U.S. durable goods, excluding automobiles and aircraft, unexpectedly rose in June, signaling manufacturing may expand in the second half of the year.

Excluding transportation equipment, demand for goods meant to last several years climbed 1.1 percent, the most in four months, the Commerce Department said today in Washington. Total orders fell 2.5 percent, the first decrease in three months. . . .

Emphasis on that last sentence because it’s the actual headline. Durable-goods orders fell 2.5% in June, as was pointed out in the very first sentence of the Census Bureau’s summary release that accompanied the data. So the Bloomberg headline might be something akin to one spouse saying to another: “I’ve been over our fixed expenses, honey, and we’re doing fine . . . excluding food.”

Now, the people at Bloomberg are smart, which makes me think two things:

1. “We know that automobiles and aircraft have been getting hammered, but is that obscuring trends in the rest of the manufacturing economy? Look, this story tells us! . . . Interesting angle from Bloomberg. My mind is growing!”
2. “This story, from the headline on down, overplays recovery and underplays trouble, directly contradicting the tenor of the Census Bureau’s release.”

Now, my question to you: which one of these reactions is more reasonable?

Please bear with a placeholder entry: This morning when I was standing in line for coffee, I saw a great news graphic — one that correctly contextualized U.S. housing numbers — on the front page of the paper version of the New York Times.

The Times site has a much fancier interactive graphic — appropriate, given the medium — but I’ll see if I can find a digital image of the graphic in the physical paper, because it did three things in a small space:

1. Conveyed that there’s been a tiny improvement in the nationwide average of housing numbers over the past two months reported.
2. Showed the improvement in context by putting the uptick at the end of a years-long bubble-&-bust cycle of housing prices.
3. Completely blew my mind by taking the extra step of dis-aggregating (or de-averaging) the information a little bit by showing how some of the local markets covered in the survey are doing better than the average — while some are still declining brutally.

For some context on why I value de-averaging, read this post.

For a quick tour of my frustration with the misreporting of economic data in the business press, you might scan this, this, and this.

More anon.