NEW YORK (CNN/Money) -
It wasn't exactly 1999 or 2000 all over again for investors in initial public offerings. But it wasn't 2001, 2002 or 2003, either.
And that's a good thing.
The IPO market bounced back sharply in 2004. Through December 9, there were 192 offerings, according to Renaissance Capital, an institutional firm that runs the IPO Plus Aftermarket mutual fund. The deals have raised a total of about $39 billion.
Sure, some IPO fans will lament that this is a far cry from 1999 and 2000. More than 400 companies went public in each of those years and nearly $100 billion was raised from IPOs in each year.
But in the past three years combined, just 221 deals made it to market. Only $80 billion was raised from IPOs during the whole period.
What was most impressive about IPOs this year, particularly in tech, was their performance. This year's 43 tech-company IPOs are up an average of 31 percent from their offering price. Plus, there was more to the IPO markets than Google (Research), the most ballyhooed debut of them all.
The search engine's IPO was a huge hit, of course. Shares have doubled since going public in mid-August. But that gain isn't even enough to crack Google in the top ten performing deals of the year. (It's the 19th best performer.)
Still, tech and telecom companies, not surprisingly, were among the biggest IPO winners this year. According to Renaissance Capital, eight of this year's top ten performing IPOs were from tech related companies.
2005 should be a good year
Investors can probably expect more of the same next year.
"The market picked up a head of steam at the end of the year," said Kathy Smith, a research analyst with Renaissance Capital. "The individual investor woke up with Google."
| * change from offering price as of Dec. 8, 2004|
| Source: Renaissance Capital|
Smith adds that there could be as many as 250 IPOs next year and that they could raise as much as $50 billion.
And the tech sector will once again likely lead the way.
"I don't think the IPO markets will slow down at all," said David Menlow, president of IPOfinancial.com, a research firm. "And tech IPOs will always have that extra bit of sex appeal for investors."
With that in mind, what are some of the private companies that investors should keep an eye on as possible IPOs next year?
Smith said two tech-related companies that have already filed to go public, FTD and Dolby Laboratories, will be worth watching.
FTD, the online flower retailer, actually has already been a public company and is once again hoping to cash in on investors' rekindled love affair with online retailers. FTD went public in 1999 and was subsequently bought and taken private. Now it's back.
The company generated revenues of about $400 million in the fiscal year ending in June, up nearly 10 percent from a year ago. But FTD also posted a net loss of $11 million.
Dolby looks more compelling. The company, popular for its surround-sound and digital audio technology, has a fairly well known brand name. Sales increased by 33 percent in its latest fiscal year, to $289 million. What's even more impressive is that Dolby posted a profit of $57.3 million, up about 20 percent from a year earlier.
As for private companies that have yet to file, I think Vonage is definitely one that probably will look to go public in 2005.
The company is one of the leaders in the nascent Internet telephone business, a technology that's most commonly known by the buzzword (or is it buzz acronym?) VoIP, which stands for voice over Internet protocol. Vonage has about 300,000 customers.
Huawei Technologies is a likely IPO candidate as well. The Chinese manufacturer of networking equipment is emerging as a tough competitor to companies like Cisco Systems and Lucent Technologies. The company said it posted sales of $3.83 billion in 2003 and that it expects revenues to hit $5 billion this year.
Still, don't expect 2005 to be a return to the heady days of the late 90's when all companies seemed to need was a quirky name and a pipe dream to go public.
Menlow said that one of the more encouraging aspects of the IPO market this year was that many of the top performers were established, and in many cases, profitable companies.
That's a big difference from the more speculative offerings that dominated the IPO calendar in the late 1990's...and Menlow thinks that this trend will continue in 2005. Google, besides having a well-known name, benefited from being highly profitable after all.
"Google certainly cleared a path for other companies in tech to go public," said Menlow.
"But it doesn't sound the all clear."
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