The US initial public offerings market may have started 2005 strongly, but has since waned as the stock market grew more vulnerable and mergers increased. Only a few deals are expected in March and experts said it could be another month before the backlog of initial public offerings that have already been filed start to hit the market. The reasons vary from instability in stock markets, to high oil prices, to more merger and acquisitions taking the place of IPOs, they say.
"There are a lot of deals filed and ready to go. There were so many deals that came out at the end of the year, everybody was trying to get the pipeline filled up," said Sal Morreale, an institutional salesman for Cantor Fitzgerald who tracks IPOs.
Still, compared with a year ago, the IPO market has picked up slightly, even though the aftermarket performance has been lackluster. There have been 44 IPOs so far this year worth a total $10.6 billion, or about $241 million each on average. The average percentage change in the stocks to date is 4.6 percent, according to market research firm Dealogic.
That compares with 36 deals for a total of $8.6 billion in the same period of 2004, or an average of $239 million per deal. On average though, the stocks performed better after those offerings, gaining 11.7 percent in their first month.
The deals that have hit the market this year have been a mixed bag. The IPO of debt-laden PanAmsat Holding Corp on Thursday fell flat, with shares losing 3 percent in their first day of trading. But earlier this month, the shares of International Securities Exchange Inc came flying out of the gate, gaining 57 percent in its first day.
One seasonal reason for the slowdown this month could be the close of the first financial quarter, said Tom Taulli, who runs an IPO research Web site called Current Offerings. As companies are busy working on financial results and internal audits to comply with disclosure regulations, they are putting off actually starting their IPOs, he said.
In addition, oil prices at more than $50 have some investors on edge as they wonder how long the historical highs can last, he said. And instability in the Nasdaq stock market and sharp drops in blue chip stocks like General Motors Corp, which sank to their lowest level in more than a decade after the car maker cut its profit outlook, also weigh down enthusiasm.
Another factor is the recent rally in the mergers and acquisitions market, as companies that planned to go public turn instead to deals, Taulli said.