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The IPO market is set for its busiest week in more than two years as a steadier stock market and the success of one deal is encouraging more companies to sell shares to the public.
Companies planning initial public offerings have had a rough time this year as turbulent stock markets sapped investors' appetite for risk. Wary buyers demanded heavy discounts on shares of companies burdened with debt, lacking operating histories or slow growth.
Nineteen companies have gone public in 2010, while 10 companies have postponed or withdrawn their offerings. Nearly 60 percent of those that pushed through to market accepted less for their shares than they had expected.
But as the stock market gradually moves higher after a volatile start to the year, more companies are lining up to go public. The Standard & Poor's 500 index, after slipping in January, is now up about 4 percent for the year.
"Investors are becoming less critical because the crash is further behind us," said IPOdesktop's Francis Gaskins. "People need to invest their money and the stock market is up."
Banks are also starting to offer more appealing companies, according to IPO market tracker Scott Sweet of IPOBoutique. This week, Financial Engines Inc., whose shares shot up 44 percent in its debut Tuesday, was the first solid success of 2010. It had a prominent founder in Nobel winner William Sharpe, a niche market advising small investors, and the assets it managed were growing fast. Other companies whose prospective IPOs are generating buzz include electric car maker Tesla Motors Inc., prepaid financial services company Green Dot Corp., video game rental service GameFly Inc., options exchange CBOE Holdings Inc. and wireless network provider Meru Networks Inc. Meru hopes to debut during the last week in March, while the other companies have not yet set a date.
There are 11 companies expected to start trading in the next two weeks, according to data from Renaissance Capital and IPOScoop.com. If all seven companies slated for the week of March 22 start trading, it would be the busiest week of activity since November 2007, according to business data provider Hoover's.
And the pipeline is building, with 14 companies so far in March saying they are planning IPOs. Only 15 companies did so in all of February. While that's paltry compared to the IPO heyday of the late 1990s, it's an improvement from last year.
For next week, IPO watchers like two smaller tech deals. Calix Networks Inc., which provides broadband communications hardware and software to small- and mid-sized businesses, hopes to raise about $75.6 million. MaxLinear Inc., which makes chips for PCs, phones, TVs and other electronics, wants to raise about $64.8 million -- although some analysts worry that 54 percent of its revenue comes from one customer.
First Interstate BancSystem Inc., the first U.S. bank to go public since Encore Bancshares Inc. in July 2007, is also generating interest. Brazilian bank Banco Santander Brasil SA sold U.S.-listed shares to investors last October.
First Interstate, which hopes to raise about $130.5 million, operates banks in Montana, Wyoming and South Dakota, all states with unemployment rates lower than the national average. Loan losses have risen at the Billings, Mont., bank during the recession, but it is in good financial shape, Sweet said.
Worries about inflation and the government curbing credit have weighed on IPOs from China this year. But China Lodging Group Ltd., an economy hotel chain, has a good revenue stream, said Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles.
To be sure, some companies slated for next week might have to accept lower prices on shares than they want. Greek shipper Alma Maritime Ltd., which is looking to raise about $225 million, follows two underwhelming shipping deals earlier this month. Film Department Holdings Inc. has been trying to sell its IPO since early February, and has already cut its deal size. Chinese advertising agency Redgate Media Group was supposed to start trading this week. It too, shrank its offering.