‘Quiet Period’ end is crapshoot for IPOs

(Bloomberg) -- Vanguard Health Systems Inc. dropped yesterday even though analysts’ initial reports on the hospital operator unanimously recommended buying the stock. The loss was hardly exceptional.

Shares of most U.S.-based companies that made initial public offerings of at least $300 million this year declined right after a so-called quiet period ended, according to data compiled by Bloomberg. The period, mandated by the Securities and Exchange Commission, lasts for 40 days.

The chart shows how Vanguard compared with HCA Holdings Inc., another hospital chain that made this year’s biggest IPO at $3.8 billion, and LinkedIn Corp., the group’s best performer relative to its initial price.

Ten brokerages gave Vanguard some kind of a “buy” rating, Bloomberg’s data showed. The Nashville, Tennessee-based company, controlled by Blackstone Group LP, climbed as much as 3 percent in early trading before closing 5.8 percent lower. Health-care stocks retreated on concern that a plan to reduce the federal deficit may lead to Medicare cuts.

“VHS has an impressive collection of assets,” Adam Feinstein, an analyst at Barclays Capital, wrote in a 146-page report that referred to Vanguard by its stock symbol. Barclays led the IPO’s underwriters along with Bank of America Merrill Lynch and Citigroup Inc.

Vanguard was the seventh IPO to drop on the first day of trading after the quiet period, and its loss was the biggest.  HCA was among the others, as it fell 1.1 percent on April 19. Five more rose, led by LinkedIn, a social-media network that surged 12 percent on June 28.