Business Briefs
Star-Bulletin staff & wire reports

Sunday, August 14, 2005


Underwriters dropped the ball on Hoku IPO

I am glad for Hoku (Scientific Inc.) and Hawaii but the underwriters did not handle this well.

Hawaii's first IPO in 6 years was an important milestone, but, marketwise, it is going to be difficult for Hoku to climb unless their earnings are spectacular going forward.

It might have been better to have patience and price in double figures sometime later with some larger earnings.

Other errors:

» A Friday in August??? Most decision markers at investment firms are on vacation or counting the minutes till the weekend.

» The same day as IPOs from Baidu (Chinese Google -- very hot) and Dresser Rand (oil -- hot). Hoku was always going to struggle for attention. No one should IPO in August unless they are a hot, profitable stock in a equally hot sector.

» Hoku will now be known on the street as a "failed IPO." Marked down twice in recent days and then closing down on opening day. If it falls below $5, it becomes very difficult for institutions to buy. And no analyst will follow it.

» Hoku could have listed in Japan, where Hoku's main customers are. I suspect it would have got a better valuation. Almost all IPOs open up higher, and there is usually just one a day to focus investors. There is also less lock-up provision so insiders can sell.

I hope the next IPO from a Hawaii firm is handled better.

Veryan Allen,

Editor's note: Hoku Scientific Inc., a Kalihi-based fuel-cell technology developer, had its initial public offering on Aug. 5 after its offering price was reduced twice. After initially giving a range of $11 to $13, lead underwriter Piper Jaffray lowered the range to $8 to $9 and then again to $6. It also reduced the number of shares offered to 3.5 million from 4.2 million. After falling 64 cents, or 10.7 percent, on its first day, Hoku has since rebounded and closed Friday at $6.22, up 3.7 percent up from its offer price.

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