One of the casualties of the stock market swoon of 2000-2002 was the initial public offering (IPO) market. There were only about 85 companies that began trading shares publicly for the first time in 2003. In 1999, there were more than 500 IPOs, and more than 400 in 2000.
The good news for IPO enthusiasts is that although 2003's 85 IPOs reflect a volume that hasn't increased from 2002 (which also had about 85), the volume did pick up in the last quarter. This has IPO speculators excited, as they expect heightened activity in the coming quarter.
A recent Reuters article notes that "Bankers priced 24 IPOs in December alone, making it the most productive month in three years since 27 deals in October 2000, according to John Fitzgibbon, editor of 123jump.com, an online IPO monitor."
The article also listed some of the year's most successful new issues (in terms of "aftermarket performance"), which include Accredited Home Lenders Holding Co. (Nasdaq: LEND ) , a non-prime mortgage banker, up more than 300%; Infinity Property & Casualty Corp. (Nasdaq: IPCC ) , which more than doubled; and of all things, a steel company, International Steel Group Inc. (NYSE: ISG ) , advanced nearly 50%.
Among the more well-known debuts this year were online travel specialist Orbitz (Nasdaq: ORBZ ) and China's largest life insurance company, China Life Insurance Co. (NYSE: LFC ) . Initially valued at $3.5 billion, China Life's IPO was the largest new issue.
In general, we have long recommended that investors avoid IPOs, for reasons such as:
- Their underlying firms tend to be younger than other companies, and less proven, without established track records. (You can always wait and invest in a given company later.)
- There are plenty of other fish in the sea. (The sea currently contains more than 5,000 public companies, to be more precise.)
- The IPO process is flaw-ridden, with small investors generally not being welcome and big players often engaging in some shenanigans.
If you're still interested in IPOs, read the ABCs of IPOs and this piece by Jeff Fischer, where he lists some coming IPOs of interest. Another major impending IPO is that of Google, which is expected to debut in 2004, perhaps in an unconventional way. And Cingular Wireless, a joint venture between SBC Communications (NYSE: SBC ) and BellSouth (NYSE: BLS ) , is also mulling an IPO.
For promising investments ideas, check out our Stocks 2004 report and our stock investment newsletters.
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