NEW YORK (CNN/Money) -
Even as the wider stock market founders, IPOs have enjoyed a quiet renaissance of late, though investors' window of opportunity to profit on them could be closing.
New issues started flowing in earnest last week following a Labor Day lull, and most of them made a big splash on their first day of trading.
Among the successes were such diverse companies as fingerprint-ID firm Cogent (COGT: Research, Estimates), which gained a whopping 50 percent; Beacon Roofing Supply (BECN: Research, Estimates), which increased about 23 percent; and Valley Bancorp (VLLY: Research, Estimates), a Nevada bank holding firm, gained about 17 percent.
This week, about a dozen IPOs are set to launch, led by wireless entertainment provider JAMDAT Mobile (JMDT: Research, Estimates), Chinese job-hunt company 51job (JOBS: Research, Estimates) and web analytics firm WebSideStory (WSSI: Research, Estimates), which has been in the works since 2000.
More than 140 IPOs have been priced already this year, according to the count of 123jump.com, an independent research firm, compared with 84 in all of 2003. While the broader stock indices have muddled ever downward in a tight trading range, the IPO market has been having its busiest year since 2000.
"It seems to be gathering steam," said John Fitzgibbon, an IPO analyst with 123jump.com, adding, "The IPO market can be healthy even if the broader market doesn't know where it's going."
With 160 deals on the calendar for the rest of the year, Fitzgibbon pointed out, 2004 could see 300 new stocks born, beating the total that were taken to market in 2001, 2002 and 2003, combined.
| Source: 123jump, CNN/Money |
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And many of the newborn stocks have been defying expectations. Most famously, shares of Google (GOOG: Research, Estimates) priced at $85, well below their early expected range of between $108 and $135, but have since jumped to nearly $130.
So far this year, the average IPO has gained nearly 10 percent. In contrast, the Dow Jones industrial average has lost nearly 4 percent, while the Nasdaq has lost more than 6 percent.
In fact, the weakness of the broad indices may have helped IPOs outperform, by souring investor sentiment on companies that, in more bullish times, might have extracted a high premium from the market.
"Because of the choppy market we've been having, deals are getting priced cheap," Fitzgibbon said. "People are knocking them and shying away from them."
Brave companies that do come to market in such an environment have been rewarded, Fitzgibbon said, as have investors in those companies.
Of course, some of the recent deals have been less than thrilling. Educate (EEEE: Research, Estimates), operator of Sylvan learning centers, priced at $11 a share, well below its initial range of $14-to-$16. It has since gained about 62 cents, but hasn't enjoyed the blockbuster success of other recent IPOs.
And the happy days of good bargains will eventually come to an end -- one way or another.
If the broader market finally snaps out of its doldrums, then the general public may come to covet IPOs again, as they did at the end of the tech-stock bubble in the late 1990s.
"If in fact there's a higher demand for deals, you'll be paying retail instead of wholesale," said Richard Peterson, an IPO analyst with market research firm Thomson Financial. "And if the market gets a little fluffy, you will see questionable deals as well."
And if the most IPOs are any indication, higher prices may already be the new paradigm; Cogent, JAMDAT Mobile and 51job all priced well above their initial expected ranges.
If, on the other hand, the broader market nosedives, the IPO market could totally dry up, as it did in the gloomy stretch between 2001 and 2003. But that process could take a while, with so many deals still in the pipeline.
"It would take a large decline or a significant shock to the system to see a reduction in deals," Peterson said.
And a weak broader market could mean more bargain-bin IPOs for investors.
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