The US IPO market's first-half revival from last year's moribund levels turned into a summer of discontent for many eager companies trying to tap the public markets.
Nearly 46 percent of third-quarter US initial public offerings priced below expectations, according to data provider Dealogic, and the number of withdrawn or postponed deals reached the highest quarterly total in nearly four years.
Among the third-quarter woes afflicting IPOs were terrorism worries during the Olympics and the Republican National Convention; finicky investors; and the distraction of the year's most anticipated IPO, Google Inc.
A seasonally sluggish equity market did not help either.
Looking ahead, analysts said the IPO market faces a more somber fourth quarter, particularly with a presidential election looming.
"I think the fourth quarter will be slightly better than the third quarter," said Mark Hantho, head of North American global capital markets at Morgan Stanley. "Although it will not be as strong as the second and first quarters."
US IPO volume and revenue for the first nine months of the year have soared above year-ago levels. Volume rose 407 percent to $29 billion, while revenue climbed 327 percent to $1.5 billion, Dealogic said.
Morgan Stanley and Merrill Lynch & Co ranked as the No 1 and No 2 bookrunners for US IPOs in the quarter, according to Dealogic.
Credit Suisse First Boston, which along with Morgan Stanley served as a lead manager for the Google IPO, ranked No 3.
"It was a tough quarter from the standpoint of the quality of markets," Hantho said. "It evidenced itself in a much more profound way in August when volumes dried up and many deals were either priced at the lower end of the range or withdrawn."
Bankers and analysts said it remains a buyers' market, with investors unwilling to fund "idea" companies.
For instance, Nanosys Inc, whose offering had been dubbed a "coming-out party" for the burgeoning nanotechnology sector, withdrew its IPO.
While proponents tout nanotechnology as a potential multibillion-dollar industry, investors were soured when Nanosys warned it had not made any product sales, did not anticipate commercial product sales for the next several years, and expected losses for the "foreseeable future."
"Investors are really putting each offering through the ringer," said David Menlow, president of IPOfinancial.com, which tracks IPOs.
But some IPOs still capture investors' imaginations.
In the past two weeks, shares of wireless game maker Jamdat Mobile Inc and fingerprint identification company Cogent Inc COGT.
IPO have soared in their market debuts, buoyed by strong growth prospects in their respective industries.
There are now 162 IPOs in the backlog, which are slated to raise $31.4 billion, according to Dealogic.
While those deals will not face the third quarter's Google-mania or stagnant summer markets, they must contend with the US presidential election.
Bankers and analysts disagree over how much of an impact the election will have, just as they disagree over how much impact Google had during the summer.
But they do agree that the election and its continual media coverage will provide a distraction as the date draws near.
"It muddies the water," Menlow said. "It's just going to take the wind out of the sails to a certain extent."
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