Companies Launch IPOs Before Investor Enthusiasm Wanes

Wednesday, 27 Jul 2011 12:45 AM

By Michelle Smith

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When it comes to initial public offerings, or IPOs, it appears that companies and investors have the same thought: get in now.

The Los Angeles Times says investors are seeing the huge gains from the recent IPOs of Internet-related companies such as LinkedIn and Zillow and they are being drawn to the sector.

On the other side of the aisle, “companies and their investment bankers are pushing out deals before investor enthusiasm for the sector wanes,” said Scott Sweet, Senior Managing Partner at IPO Boutique.

As a result of all of this enthusiasm, the Times says that the 11 IPOs scheduled for this week is the largest number seen since 2007.

Included on the roster are Green Mountain Coffee Roasters, a seller of beverages such as coffee, tea and cocoa, and C & J Energy Services Inc., which provides premium hydraulic fracturing and coiled tubing services.

Though none of the companies going public this week are Internet-related, IPO Scoop says that combined, the deals on the table are expected to raise $2 billion.

The Globe and Mail calculates the number of IPOs thus far this year at 84, which is an 18 percent increase over the number of companies going public during the same period last year.

IPO Scoop says “next week, the IPO traffic just keeps coming.”

And the Times forecast for the furor extends beyond that. “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.”

The astronomical surges in value of companies such as LinkedIn and Zillow may have some investors impressed and ready to throw their cash around, but for some others, this furor has “stirred unpleasant memories of the late-1990s dot-com boom that popped in 2000,” says the Times.

Investors who haven't taken the time to think back to the turn of the century may want to excuse themselves from the frenzy for a moment to ponder their decisions. Overall, says the Globe and Mail, “IPOs continue to deliver poor results for investors – an underperformance that has been supported by academic evidence.”

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