The US initial public offerings market, the picture of health in the second half of the year even as wider markets have been gloomier, is showing signs of wear and tear as enduring credit market woes create an unpredictable environment.
"As the markets in recent weeks have been adopting a more negative tone it has been harder and harder to get deals done," said Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles. "Look at the number of deals that have been postponed or withdrawn."
In the last two weeks, 11 companies that had planned to float their shares on US stock exchanges have either withdrawn or postponed their deals, most of them citing unattractive market conditions, according to data tracker Dealogic.
A dozen IPOs, which had expected to raise a total of $2.5 billion, also hit the brakes in October.Indeed, companies have been getting cold feet at a much greater rate over the last six weeks despite market volatility having taken hold of US markets months earlier.
Through the first nine months of 2007 an average of 5 IPOs were withdrawn or postponed each month, Dealogic data show. The latest numbers show that wider market volatility is finally being felt by companies trying to list for the first time, Morreale said.
That doesn't mean all deals are poorly received, or that IPOs have dried up, however. A week ago, 17 US IPOs raised more than $3 billion, according to Dealogic, a record number of issues for any one week in 2007. And this week, a dozen more issues debuted, some to great fanfare.
Investment analytics firm MSCI Inc, a Morgan Stanley spin-off, rose 45 percent in its market debut on Thursday. And Rubicon Technology Inc on Friday soared 25 percent rally over its IPO price. Out of 29 IPOs in the last two weeks, 15 have risen in first day trading.
Others have fared less well, including the week's most high-profile flotation, by $30 billion hedge fund Och-Ziff Capital Management, which raised more than $1 billion. The stock is down 12.5 percent from its IPO price.
The dynamic is hard to pinpoint ahead of time, Morreale said, adding that he is changing his ratings for new issues on a daily basis as investor interest turns hot, then cold, or vice versa."It is because the markets are so sensitive," he said, noting that some deals are "quiet" but then do well in their market debuts, while others generate fanfare but are then poorly received.
"The environment is getting harder and harder," he added. Year-to-date, there have been 209 US IPOs, 28 percent more than a year ago at this time, according to statistics released by IPO research firm Renaissance Capital's IPOhome.com.
And management is still lining up to launch IPOs at a quicker clip than a year ago. Currently, 128 companies have filed with the US Securities and Exchange Commission to float their shares in the United States, with the deals looking to raise a total of $34 billion.
By value, that is 34 percent ahead of a year ago, when the pipeline contained 148 deals, valued at about $22.4 billion, according to Dealogic. While the new issues market has grown more unpredictable in recent weeks, robust demand for IPOs throughout the year means the sector has still outperformed broader equities markets.
The Renaissance IPO Index, a float-weighted index of IPO performance, has returned 10.2 percent so far this year compared with 2.3 percent for the S&P 500 Index, a bellwether of US stock activity. The operator of an online credit card marketplace and a company that offers Web-based real estate services are on the IPO calendar next week, typically a quiet week given the US Thanksgiving holiday.
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