IPOs take flight
Public markets get ready for more listings from big name and private equity firms.
NEW YORK (Fortune) -- After a six-month hiatus of initial public offerings, the market looks to be heating up.
Though there have been only 49 filings this year -- a 66% drop from 2008 -- 25 of those filings occurred in July and August. And these aren't unknown companies: Dollar General, Hyatt Hotels, and Ancestry.com are just a few looking to hit the trading floor.
On Thursday alone, five companies went public. That's the most in one day since Nov. 15, 2007, when six debuted.
The newly public companies received a mixed reception. U.S. car battery maker A123 Systems (AONE) was by far the best peformer, with its stock skyrocketing a whopping 43% midday. The other four firms that debuted Thursday were two REITS: Apollo Commercial Real Estate Finance (ARI) and Colony Financial (CLNY), as well as asset management firm Artio Global Investors (ART) and online drugstore Vitacost.com (VITC).
There are three more expected to go public before this week is out and an additional eight are on tap to debut over the next two weeks.
The average IPO has returned 23% from its offer price year to date. The Renaissance IPO Composite Index, a float-weighted index of IPO performance, has returned about 42% so far this year, compared with 18% for the S&P 500.
"I'm willing to go out on a limb and say there will be more offerings this year than in 2008," says Kathy Smith, a principal at Renaissance Capital, an IPO data tracker based in Greenwich, Conn. "We're already at 27 IPOs done, and there were only 42 done last year. We expect to see an awful lot September through December."
"I'm willing to go out on a limb and say there will be more offerings this year than in 2008," says Kathy Smith, a principal at Renaissance Capital, an IPO data tracker based in Greenwich, Conn. "We're already at 22 IPOs done, and there were only 42 done last year. We expect to see an awful lot September through December."
Despite the optimistic prediction, Smith cautions that the IPO market isn't open to everyone. Financial firms -- like mortgage REITs Starwood Property (STWD) and PennyMac (PMT) -- are active now because of low interest rates set by the Federal Reserve. And many of the offerings are coming from private equity shops -- both leveraged buyout types and venture firms.
"They have portfolios chock-full of companies in need of harvesting and haven't been able to because there was no market," Smith says. "We're seeing the very best of their companies coming out first to gauge investor appetite."
Case in point: On Aug. 20, LBO giant Kohlberg, Kravis & Roberts filed for discount chain Dollar General to go public and raise $750 million. And the Pritzker family, owner of the Hyatt Hotels, filed on Aug. 5 to raise $1.15 billion through its offering.
Other companies that have submitted IPO filings include clothing retailer rue21, Marathon Real Estate, and Shanda Games Limited.
As for industry standouts, tech is king.
Bridgepoint Education (BPI), which offers online B.A., M.B.A., and Ph.D. degree programs, priced at $10.50 in mid-April and has seen returns of 87%.
And Changyou.com (CYOU), a Chinese online gaming company that decided to trade only in the United States, set an offer price of $16. Its return so far? An astounding 140%.