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by Martin Denholm, Senior Editor
What would you do with $3.5 billion?
While you decide between a luxury beach house on your own private island in the South Pacific, or a Swiss-style log cabin in the Alps, Corporate America is mulling over an option that isn’t nearly as sexy, but is hugely important.
Pumping some of it into the IPO market.
Today kicks off a busy week, in which eight deals are on the table, worth a combined $3.5 billion. Among them is Chinese media firm, Shanda Interactive (Nasdaq: SNDA), which has raised $725 million to spin off its Shanda games division.
Eight deals in a week – the most since December 2007 – evokes memories of the heady days of the mid 2000s when companies were falling over themselves to hit the stock market. Already, the pace of new offerings at the highest level in two years – a far cry from the savage credit squeeze that we’ve seen more recently.
Moreover, the fact that the deals come in a variety of sectors shows that there is appetite across the board, rather than in just one or two areas.
Encouraging, for sure. And with the G20 summit this week, in addition to the Federal Reserve’s latest monetary policy meeting, oil prices bouncing all over the place, and the dollar once again plumbing the depths, the IPO story isn’t getting as much attention as it might otherwise do.
However, this continues a trend that has gathered steam over the second half of 2009. From January-June, the market saw a measly 11 IPOs. But since July, 33 companies have hit the IPO trail.
And make no mistake… it’s areas like the IPO market and M&A market that go a long way to either boosting or knocking investors’ confidence.
Question is, are these firms insane to be debuting on the exchanges now – at the end of what many economists believe was a sweet six-month rally, but one that is ultimately unsustainable from here?
Time will tell. But be careful when investing in stock market debutants, as their early movement is very volatile. You don’t want to be caught chasing high returns at the expense of common sense.
For more information, be sure to check out my colleague Lou Basenese’s column about the IPO market and tips on IPO investing. And look for the next big launch in early October – insurance firm Verisk, which is set to be the biggest IPO since Visa’s (NYSE: V) mammoth $19.7 billion debut in 2008.
Martin Denholm
P.S. Lou is also a master at identifying the most explosive, little-known firms that have a true edge on their competition (often because they have markets all to themselves!) He calls them “white cap” stocks and to see just how profitable they can be for you, check out this report.
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