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Silence in IPO Market is Deafening

Ian Wyatt

There have been two IPOs so far this month. That’s it – two. If that isn’t a statement about the uncertainty in the market, I don’t know what is.

Only biodiesel company Renewable Energy Group (Nasdaq: REGI) and insurance software maker Guideware Software Inc. (NYSE: GWRE) have had the nerve to go public this month. Another company, IntelePeer, postponed its IPO yesterday, citing poor market conditions. Verastem, a company that develops stem cell therapies for metastatic cancers, is slated to go public as early as tomorrow. Other than that, no other companies are in the IPO pipeline for January.

Even if Verastem hits the market tomorrow, it would bring the monthly IPO total to three. That would make this the slowest January since 2009.  

The IPO market was hot in November and December, when 27 companies went public. But that was amid the holiday season and Black Friday sales. With shopping season over, the IPO market has returned to what it was in September and October, when a combined two U.S. companies went public.

Who can blame companies from being apprehensive about joining this market? Worldwide, 62% of initial public offerings finished 2011 below their IPO price. And 70% of them finished the year below their first-day closing price. Those statistics were released earlier this month. Clearly, some companies took note. And it's likely that investors are gun shy after buying into IPOs at what has clearly been a premium.

Thankfully, next month is shaping up to be different. Eight IPOs are scheduled to price in the first week of February alone. More are slated for the following week. That doesn’t mean all of them will launch. Some may get cold feet and pull out at the last minute like IntelePeer just did.

But with more IPOs lined up in the first week of February than there were the entire month of January, perhaps it will encourage other companies to come out of their post-holiday hibernation.

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