Stocks rally breathes life into IPOs
NEW YORK - Coming off its worst year in three decades, the market for initial public offerings is starting to show signs of life.
Eight companies are looking to raise up to $3.7 billion when they go public next week, the most activity the nation’s IPO market has seen in a single week in nearly two years and a clear sign Wall Street’s appetite for risk is returning.
IPOs all but dried up in 2008 as investors shunned the traditionally risky bets and moved into safer assets like cash and Treasurys as the stock market tumbled.
Only 43 companies completed IPOs in the United States last year, down from 272 the year before and 221 in 2006, according to Renaissance Capital’s IPOHome.com. It was the slowest year for IPOs since 1978.
The amount of money raised through IPOs last year sank 53 percent to $28 billion, but more than half of that came from just one offering. Without the mammoth $18 billion Visa Inc. offering in March, the largest US IPO on record, last year’s total would have been a paltry $10 billion, far below the $59.7 billion raised in 2007.
The IPO market has trudged along so far this year, with 22 companies raising $5 billion in capital. Next week’s heavy load of offerings could mark a turning point in the market - if all goes well.
Analysts attribute the resurgence in IPO activity to growing confidence in the stock market. Major stock indicators are up more than 50 percent since hitting 12-year lows in early March.
The number of companies preparing to go public has been gaining pace since early July, four months after the stock market bottomed out. There are now 89 companies in the IPO pipeline, up from 29 in March.
Many of the companies on next week’s calendar are large and well-established, with solid balance sheets that analysts say should attract strong demand.
Among the deals scheduled are Shanda Games Ltd., a spinoff of Chinese online game developer Shanda Interactive; Foursquare Capital, a newly formed mortgage real estate insurance trust backed by AllianceBernstein; and Artio Global Investors, the parent company of Julius Baer Investment Management.
Companies looking to come public in the coming months include Dollar General, Hyatt Hotels, and Dole Food Co.
Correction: Because of an error by the Associated Press, Artio Global Investors was misidentified in a Daily Briefing item in Friday's Business section. Artio Global Investors is a subsidiary of Zurich-based wealth manager Julius Baer Holding Ltd.
