Cautious Optimism in IPO Market

In the week following this year's offerings, the share price of the top-performing IPOs climbed an average of 11.9 per cent, compared with an increase of 6.2 percent last year.

The market for initial public offerings is off to its fastest start since 2000.

So far this year, 33 companies have raised $6 billion by going public, reported the Financial Times. Last year at this time, 26 companies had gone public, though they, too, raised about $6 billion.

Investors in IPOs are also faring better than they did last year. Citing data from Dealogic, the FT pointed out that in the week following this year’s offerings, the share price of the top-performing IPOs climbed an average of 11.9 per cent, compared with an increase of 6.2 percent last year.

“This IPO environment has greater breadth and more stability than in the past,” Jeff Bunzel, head of equity capital markets for the Americas at Credit Suisse, told the paper. “Portfolio managers are looking for any way they can to find outperformance, and they can get it through IPOs.” One reason that IPOs have performed so well, said David Topper, co-head of equity capital markets at JPMorgan, is that they have not been priced aggressively in the first place.

Among the biggest winners so far this year is Chipotle, the Mexican food chain spun off by McDonald’s, whose share price has doubled since it went public in January.

And last week the share price of two other IPOs climbed strongly on their first day of trading: shoe manufacturer Crocs Inc. and radiology-services provider NightHawk Radiology Holdings Inc.

On the other hand, last week The Wall Street Journal observed that Vonage Holdings Corp.’s proposed $250 million IPO has received a lukewarm reception from investors because of the company’s heavy spending and losses.

Also last week, the Journal reported, the IPO of energy-related limited partnership Magellan Midstream Holdings LP opened flat and fell 2 percent; insurer AmCOMP Inc. opened and closed flat; and biopharmaceutical company Acorda Therapeutics Inc. surged 12 percent, but only after it cut its anticipated price in half.

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