Market ripe for IPOs
IPO fever is back.
Five years after the financial crisis dampened enthusiasm for initial public offerings, investors are again eager to buy shares when companies start trading. Twitter is the star this week, but the number of offerings shows that social-media darlings are not the only ones seeking and attracting investors.
There have been 190 offerings this year, and momentum has built as market indexes have set highs. October's 33 offerings made it the busiest month since November 2007, according to data provider Dealogic. And a dozen expected offerings this week tie it for the busiest week of the year.
“It's a wild week in IPO land,” said Scott Sweet, who runs IPOBoutique, which researches and invests in IPOs.
A more active IPO market signals investor confidence in the economy. And the cash that companies raise in an IPO can help them invest and hire more, potentially supporting economic growth.
Twitter is the big one. On Monday the online short-messaging service raised the expected price for its shares to $23 to $25 each, up from $17 to $20. The new price is enough to raise more than $2 billion. It is expected to trade on the New York Stock Exchange under the symbol “TWTR.”
Twitter appears cautious about how much it is seeking from investors after Facebook's IPO last year. On its first day of trading, Facebook's stock finished just 23 cents higher than its $38 IPO price, and it lost more than half of its value in its first four months.
Although the shares are 28 percent above their IPO price, many investors believed Facebook stock was priced too high initially. Twitter's price range was lower than many analysts expected. Many market watchers believe Twitter is trying to avoid the perception that its shares are overpriced.
“They're obviously learning from the very serious mistakes Facebook made,” Sweet said.
It's not unusual for a bull market in stocks to bring out the companies that want to raise money from the public.