Next week is slated to be the biggest for initial public offerings in the United States in nearly two years -- and some say the resurgence could be sustainable.
There are eight deals on deck and they are expected to raise $3.5 billion, which would increase 2009's total so far by 66.1 percent. In an additional sign of strength, they run the gamut from real estate investment trusts created to buy toxic assets to a clean tech firm that has never made a profit.
That broadening of industries shows how much the IPO market has healed since a six-month virtual drought ended in February, with the recovery in the IPO market that started in China and Brazil making its way to the United States.
It's too early to say 'everything's fine, everyone come back into the pool,' but we are seeing signs that more and more types of investors are coming back to the market and there is robust interest in IPOs, said Mary Ann Deignan, head of equity capital markets for the Americas at UBS Investment Bank.
The number of deals could make it the busiest since the week of Dec. 9, 2007, when 11 IPOs came to market. So far this year, there have been only 22 IPOs.
LESS RISK AVERSE?
Among the IPOs ready to test investor appetite for risk is Foursquare Capital Corp, a REIT that will be run by a unit of money manager AllianceBernstein and plans to raise $500 million with which to buy toxic assets under a U.S. Treasury program.
Two other REITs, Colony Financial Inc and Apollo Commercial Real Estate Finance Inc, created by Leon Black's private equity firm, are each seeking hundreds of millions to buy commercial mortgage-backed securities betting that their values will rebound.
IPO investors are becoming more adventurous again.
Investors are looking more broadly across all sectors now. It's not just defensive names that are appealing, Deignan said.
But a flop or two next week, or a sudden end to the recent stock market rally, could be enough to send investors running for the doors again, an analyst said.
People could be frightened if some of these deals do badly, said Nick Einhorn, a research analyst at Connecticut-based investment firm Renaissance Capital.
Despite considerable buzz, A123 Systems Inc, a promising lithium car battery maker gunning for $225 million, may give investors pause as it would be the first this year by an unprofitable company.
Two of the offerings are carveouts from large companies: Swiss bank Julius Baer's U.S. asset management unit Artio Global Investors Inc ($585 million) and Chinese media company Shanda Interactive's spin-off of its gaming unit Shanda Games Ltd in a $725 million IPO.
Investors have been receptive to carveouts this year. Shanda Games' rival Changyou.com Ltd was carved out of Chinese Internet portal Sohu.com and has risen 156 percent since its IPO in April in the best performance of the year, leading some analysts to say Shanda could see the strongest first day jump of next week's crop.
Investors have been rewarded -- 13 of 16 IPOs (excluding REITs) this year have risen since their debuts and the FTSE Renaissance IPO Index is up 41.3 percent, besting the S&P 500 Index's .SPX 18.4 percent rise.
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The spike in IPOs has come as a relief to investment banks that covet underwriting fees and the prestige of being on the hottest deals.
Of all investment banks, Goldman Sachs, which is co-managing five of the IPOs, stands to gain the most if next week's deals all price at expected levels.
Goldman would jump to No. 2 from No. 8 in the league tables for 2009 so far, barely behind rival Morgan Stanley, according to projections by Thomson Reuters.
Morgan Stanley would leapfrog over Bank of America Merrill Lynch which would fall to No. 3 -- though all the top three would be within a hair of each other.
While IPOs remain inherently risky investments, the slew of IPO filings since July point to a sustained spike in IPOs through the end of the year, Deignan said.
Since July 1, 33 companies have filed for IPOs, while only 11 had in the first half of the year.
Deignan doesn't think the market will maintain next week's torrid pace, but expects two to three IPOs per week to become the norm again in the coming months.
We could see a good number of those late summer filings come to market this fall, she said.
(Reporting by Phil Wahba; Editing by Phil Berlowitz)