What happened? Both IPOs that made it to market last week took advantage of different aspects of discount pricing. And the third deal, now set for the week of June 7, also got in on the discounting act.

Better Than Expected:
Global Signal (GSL: chart) is a Sarasota, Florida-based real estate investment trust, or REIT, operating 2,206 towers and 251 other communications sites mostly in the southeastern and mid-Atlantic regions of the United States. On Wednesday, Global Signal priced its IPO of 7 million shares at $18 a share. That was on the high end of its $16- to $18-a-share filing range. The message was clear in today’s IPO market. The deal was in demand. It opened at $20.10 a share on Thursday, June 3, 2004, and traded out the week in a narrow range. It sold high at $20.80 a share, hit a low at $20 a share, and closed Friday at $20.48 a share –- UP 13.8 percent from its initial offering price.

That was unexpected, considering what happened to the last three REITs to go public:
·Arbor Realty Trust (ABR: chart) priced its IPO at $20 a share on April 16, 2004. The stock closed Friday, June 4, 2004, at $18.98 a share -- DOWN 5.1 percent from its initial offering price.

·Capital Leasing Funding (LSE: chart) priced its IPO at $10.50 a share on March 18, 2004. The stock closed Friday, June 4, 2004, at $10.30 a share -- DOWN 1.9 percent from its initial offering price.

·Origen Financial (ORGN: chart) priced its IPO at $8 a share on May 5, 2004. The stock closed Friday, June 4, 2004, at $8.16 a share –- UP 2 percent from its initial offering price.

To find out why the Global Signal IPO performed better than expected in the aftermarket, just listen to the tape. The tape told the story. The Global Signal IPO was actually priced at a discount to its true value in the aftermarket. So investors snapped up Global Signal stock at the $18-a-share IPO price and demand drove the stock up to a range of $20.10 to $20.80 a share when the stock began trading. That reflected Global Signal’s true worth – somewhere between $20 and $21 a share – or about $2 to $3 a share ABOVE where it went public. That discount pricing strategy set the stage for Global Signal to wrap up the week with a double-digit percentage gain above its IPO price.

No Surprises:
Inhibitex (INHX: chart) is an Alpharetta, Georgia-based biopharmaceutical company engaged in the discovery of antibody-based products to prevent and treat serious bacterial and fungal infections in the hospital setting. On Thursday, Inhibitex priced its IPO of 5 million shares at $7 each, down from 5.9 million shares at $10 to $12 each. Inhibitex opened at $7.51 a share on Friday, June 4, 2004. It sold high at $7.75 a share, hit a low at $7.02 a share and closed at $7.22 a share –- UP 3.1 percent from its initial offering price.

Not So Fast:
Metabasis Therapeutics (MBRX proposed) is a San Diego, California-based biopharmaceutical company focused on developing small-molecule drugs to treat liver diseases and metabolic diseases linked to pathways in the liver. Metabasis cut its proposed offering to 5 million shares at $8 to $9 each, down from 6 million shares at $11 to $13 each, and pushed the offering date into next week.

But Metabasis didn’t do anything that hasn’t been done many times before. That’s what the Inhibitex IPO did -- cut its deal and kick it into the following week.

The aftermarket performance of Inhibitex and the adjustments of the Metabasis deal were somewhat expected, considering what happened to the last three pharmaceutical companies to go public:

·ACADIA Pharmaceuticals (ACAD: chart) priced its IPO at $7 a share on May 26, 2004. It had been cut from a filing range of $12 to $14 a share. The stock closed Friday, June 4, 2004, at $6.02 a share -- DOWN 14 percent from its initial offering price.
·Alnylam Pharmaceuticals (ALNY: chart) priced its IPO at $6 a share on May 27, 2004. It had been cut from a filing range of $10 to $12 a share. The stock closed Friday, June 4, 2004, at $7.68 a share –- UP 28 percent from its initial offering price.
·Critical Therapeutics (CRTX: chart) priced its IPO at $7 a share on May 26, 2004. It had been cut from a filing range of $11 to $13 a-share. The stock closed Friday, June 4, 2004, at $7 a share --– UNCHANGED from its initial offering price.

For that matter, pharmaceutical companies represent 17 of the 67 IPOs priced so far in 2004 (excluding three unit offerings of common stock and warrants). Of these 17 pharmaceutical IPOs, only three pharmaceutical IPOs were priced above their initial filing ranges, just two pharmaceutical IPOs were priced within their initial filing ranges, and a whopping 12 pharmaceutical IPOs were priced below their initial filing ranges.

Should the Metabasis Therapeutics IPO get priced this week, that will make it 13 of 18 pharmaceutical IPOs to cut offering terms before being priced.