It will take more than Facebook to heat up the tepid market for initial public offerings. As conditions remain fragile, the backlog of public offerings has continued to grow. More than 200 American companies are now waiting to go public, the highest number in roughly a decade, according to Renaissance Capital, an advisory firm.
Demand is mixed. Investors are eagerly anticipating an offering from Facebook, which is expected to go public in the second quarter at a market value of $100 billion. But other companies ? including Toys ?R? Us, Yelp and the Carlyle Group ? may not get such a warm reception.
Facebook ?will bring a potentially unprecedented amount of attention to the IPO market,? said Peter Falvey, a managing director at Morgan Keegan, an investment bank. But, he said, ?its IPO in all likelihood won?t have a tremendous impact on the ability of other companies to execute offerings.?
The problem is that investors are still recovering from 2011. About 70% of the companies that went public in 2011 are trading below their offering prices, according to Kathleen Smith, a principal at Renaissance Capital.
Wary of risk, investors have gravitated toward more established stocks in recent months. In 2011, the Renaissance Global IPO Index, which tracks recent public offerings, tumbled 20.6%. By comparison, the S&P?s 500-stock index, which tracks large-cap companies, was relatively flat for the year.
While the majority of the public offering market is closely tied to the finicky winds of today?s stock markets and the fortunes of Europe, many analysts say they believe Facebook will be a singular event. The social network, which has nearly a billion users, is expected to attract a bevy of investors at home and abroad.
A strong debut from Facebook will not be a cure-all for the feeble IPO market, analysts say. A flop, however, could deal a hearty blow.
Last year started with promise, with a rising tide of confidence in the equity markets and an exuberance for the new generation of Internet companies. A string of technology offerings, like LinkedIn, the professional social network, and Yandex posted at least double-digit gains on their debuts.