Blackstone Group's massive upcoming initial public offering could help draw investor attention back to the IPO market, ensuring 2007 is a solid if not spectacular year for offerings. There are good reasons to think the initial public offering market could grow more active.
For one thing, companies have been buying back shares in droves, going private and selling themselves to other buyers. These transactions all leave money in shareholder pockets and investors usually want to put those funds back to work. And investment banks may be happy to oblige them.
"Wall Street, like nature, abhors a vacuum. If there is a perception that too much stock is being removed from the market, I think the IPO market will ramp up," said Tim Woolston, portfolio manager at Boston Advisors LLC.
Private equity firm Blackstone Group's planned IPO could also spur other companies to think about going public, said Ben Holmes, publisher of Morningnotes.com, an independent research company in Boulder, Colorado.
That deal could be as big as $4.75 billion, making it the sixth-largest US IPO ever and the largest of the year. The April initial public offering of MetroPCS Communications Inc, which raised $1.3 billion, holds the title of the year's biggest in the United States so far, according to Dealogic.
And another big deal is also on the horizon - Visa, the world's largest credit card payment system, could go public later this year. Last year, Visa's smaller rival, MasterCard Inc's went public in a $2.5 billion deal, making it the largest IPO of the year.
Jay Ritter, a professor of finance at the University of Florida who tracks the IPO market, said that, as long as US shares continue to do well, he sees IPO issuance rising through the end of 2007, but not dramatically. "Since the middle of 2003, there has been a pretty steady pace of 15 operating companies going public a month. I don't see anything on the cards to bring it up to the 1990s levels," Ritter added. In the late part of the last decade, there were 30 to 50 flotations each month.