At this point in the year, IPO investors can best be described as school children who, as they reached summer vacation, found out Disney World had burnt down.
Hope was on tap as investors and bankers alike anxiously awaited the summertime exodus the new issues market traditionally experiences. Anticipation of this event triggered a strong uptick in new filings this spring. Then came late June and just four companies – yes, four – had priced by press time. Instead of a flood, the market is seeing drought restrictions.
Although access to the market has been limited, private equity- backed companies are still manning the lemonade stand. Consider that three of the four early-to-mid June pricings were companies backed by private monies: Plumtree Software (NNM:PLUM), Veridian Corp. (NYSE:VNX) and Pacer International Inc. (NNM:PACR). And the diverse nature of each company’s business – Internet, defense and logistical services, respectively – demonstrates IPO investors possess a wide appetite, however discriminating it is.
What’s put the damper on the summer IPO show? The so-called crisis of confidence by investors and continued terrorist concerns have leached into every facet of Wall Street. IPO investors are particularly unnerved by these factors because of the tremendous level of risk built into their market. And as brazen as every new issue investor or schoolyard bully pretends to be, neither wants to go swimming with out a life vest in storm-churned waters.