After more than a year in the doldrums, the market for new stock offerings may be poised for a comeback, but there are signs that investors who were burned during the new-issue frenzy of recent years have become more discriminating.
Led by the red-hot energy sector and a broader market rally, initial public offerings, or IPOs, are once again a hot topic on Wall Street--with some of the more successful deals seeing strong first-day gains reminiscent of the late 1990s.
Because of the difficult market of recent months, investment bankers are bringing some of their strongest deals at lower prices. Those factors could make this a rewarding time for investing in first-time offerings, analysts said.
Indicating that the market may be on the rebound, May was the best month for IPOs in more than a year.
* Global Power Equipment Group Inc. (GEG) debuted in a $147-million IPO, and shares of the Tulsa, Okla.-based energy firm have risen 77% above the IPO price.
* Peabody Energy Corp. (BTU), one of the world's largest private-sector coal companies, priced its $420-million deal at $28 a share Tuesday. The St. Louis-based company saw prices rise more than 30% on the first day, though the succeeding gains were more modest.
* Even some technology issues are doing well. Optical networking company Tellium Inc. (TELM) priced its May 17 deal at $15 a share. The Oceanport, N.J., company is up 53.6%.
"At the beginning of the year, everything was oil and energy, but now we are seeing some variety, and that's encouraging," said Ben Holmes, analyst with IPOPros.com, a Boulder, Colo., data firm.
Both retail and institutional investors are coming back into the market.
"Right now, retail investors have a great opportunity to get in at the offer price," said Tom Taulli, author of "Investing in IPOs, Version 2.0." "Everyone had written this market off as 'No IPOs ever again.' But we are seeing a comeback here."
Still, the market is by no means booming.
So far this year, there have been just 38 IPOs, which raised $12.2 billion, compared with 170 deals raising $33.1 billion through May 25 of last year, according to Thomson Financial, a New Jersey data firm.
By one measure, performance is also lagging. The average first-day stock price gain for IPOs this year is a meager 12.8%, compared with 78.9% for the same time last year.
