Posted on: Thursday, December 18, 2003

Surge of IPOs shows return of investors' hunger for new firms

By Matt Krantz
USA Today

Just as the IPO market is about to shutter for 2003, companies are rushing new stock to investors.

Providing further proof that confidence in the stock market is on the mend, five initial public offerings stormed Wall Street yesterday, making it the biggest day for IPOs since the dying days of the Internet boom. Fourteen IPOs have started trading in December — more than started trading the entire first half of the year.

The surge just before the IPO market goes on holiday break shows that investors finally have an appetite again for new companies that need cash to grow.

"It's interesting that on the last week of IPOs for 2003, we have our most active day in more than three years," says Linda Killian, manager of the IPO Plus Aftermarket fund.

But this is no 1990s-like frenzy. Two of the day's IPOs, the much-watched online travel site Orbitz and online flower seller Provide Commerce, closed below their offering prices. Orbitz lost $1.02 to $24.98, and Provide lost $2 to $13.

Analysts say the types of deals getting done and the selective way they're being treated by investors says much about how the IPO market is different this time. Consider:

• Tech isn't the leader. The two IPOs to fall below their offering prices yesterday were the two companies involved in electronic commerce. Last week, another tech IPO, NPTest, got a similar reception. "There are no real tech trends to ride in IPOs," says Francis Gaskins, editor of IPOdesktop.com.

• No single industry is leading. Besides Orbitz and Provide, IPOs yesterday hailed from industries ranging from a for-profit education company to a lender.

Killian says it's healthy that so many industries are part of the IPO recovery. "The expansion in our economy is starting to get a grip."

• Profit still matters. While profitless companies have enjoyed the biggest run-up in the broader stock market this year, that hasn't been the case with IPOs. All five of yes-terday's IPOs have at least one quarter of profitability, Gaskins says.

"We're far away from concept stocks that won't come back" in our lifetimes, Gaskins says.

• China is hot. Chinese insurer China Life, the year's biggest IPO, raised more than $3 billion, making it the day's standout. Its shares jumped $5.04, or 27 percent, to $23.72. Now, Chinese companies have raised more money from the U.S. IPO market than domestic companies have this year, says Richard Peterson, strategist at Thomson Financial.

Despite all the positive signs, investors shouldn't assume the IPO boom is back, says Mark Basham, a stock analyst at Standard & Poor's. Even after yesterday, the number of IPOs is down 9 percent from last year and 87 percent below the level in 1999.

So while IPOs are returning, there's still a long way to go to mend the bruises from the last boom.

"I don't think anyone wants to go back to the speculative market we had before," he says.