A flurry of IPOs this week whets investors’ appetites
The largest number of initial public offerings in four years is scheduled this week as U.S. companies rush out deals to capitalize on investors’ sudden ardor for new issues.
Eleven IPOs — led by the parent of Dunkin’ Donuts — will go public as Wall Street gears up for what could be a frenetic period for IPOs.
Investors are being drawn to the IPO sector by the recent huge gains in Internet-related companies such as LinkedIn Corp. and Zillow Inc. and by the growing excitement over upcoming deals from the likes of Zynga Inc. and Groupon Inc.
Shares of LinkedIn, the social-media service for professionals, more than doubled on its first trading day in May, while real-estate website Zillow shot up 79% last week. The surges have stirred unpleasant memories of the late-1990s dot-com boom that popped in 2000.
Nevertheless, investors are clamoring to get in on any deal perceived as hot, analysts say.
“Investors are hearing [about the gains] and saying, ‘Put me in. I want in on the action,’ ” said Scott Sweet, senior managing partner at IPO Boutique in Tampa, Fla.
And even though no Internet-related stocks are going public this week, companies and their investment bankers are pushing out deals before investor enthusiasm for the sector wanes, Sweet said.
Companies “want to strike while the iron is hot,” he said.
Dunkin’ Brands Group Inc., the parent of Dunkin’ Donuts and Baskin-Robbins, is seeking to raise about $400 million, according to research firm IPOdesktop.com. Other notable newcomers include C&J Energy Services Inc., a hydraulic-fracturing company, and Teavana Holdings Inc., a retail chain.
If all the deals go through, it would be the busiest week for IPOs since mid-2007, according to IPOdesktop.com. Public offerings had ground to a virtual halt once the capital markets seized up during the financial crisis.
Through Friday, 104 U.S. companies had gone public this year, roughly on pace with the 170 offerings last year, according to research firm Dealogic Inc. That’s a pickup from the meager average of 58 companies a year that went public in 2008 and 2009, but well below the 257-company average from 2004 to 2007, according to Dealogic.
As long as the economy stays favorable, the IPO pace is expected to increase in the second half of the year as Zynga and Groupon make their public entrances. Retail and institutional investors are also eagerly awaiting a splashy public offering from Facebook Inc. The colossus of the social-media sector is expected to file later this year at a valuation topping $100 billion.
There also will be a steady supply from companies that had to delay IPOs until the financial crisis had passed.
“This is just the natural progression of companies that couldn’t go public in 2008 and 2009 and maybe 2010,” said Robert McCooey, head of stock listings at the Nasdaq Stock Market.
Part of the overhang is coming from private-equity firms, which are seeking to recoup investments on companies that were purchased before the economy weakened. For example, Carlyle Group and two other private-equity firms are selling a piece of Dunkin’ Brands, which they bought in 2005.
In the second quarter, 45 private-equity-backed companies raised more than $17 billion worldwide, the most since 2007, according to Ernst & Young.
Despite the affection for social-media stocks, some analysts say investors overall are exercising caution in IPOs. A number of companies with weak revenue or earnings have had to cancel their offerings in recent months because they could not drum up sufficient demand, experts say.
“There still is sanity,” Sweet said. “You can’t bring just a desk and a chair public like in 2000.”
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