The IPO market is starting to look like a minefield. What was once a reliable pipeline of highly anticipated market debutantes has become a sucker's bet, even for investors with the means and connections to get in on the offering price.

Here are five companies to go public this year. Let's see whether you can spot the nearly universal theme:

Company

IPO

10/17/08

Gain/Loss

ArcSight (NASDAQ:ARST)

$9.00

$6.06

(33%)

MAKO Surgical (NASDAQ:MAKO)

$10.00

$6.20

(38%)

ReneSola (NYSE:SOL)

$13.00

$7.83

(40%)

Cascal N.V. (NYSE:HOO)

$12.00

$8.38

(30%)

ATA (NASDAQ:ATAI)

$9.50

$8.29

(15%)

The four out of five dentists who prefer sugarless gum have nothing on the five out of five IPO investors who are currently in the hole on these stocks. The losers above come from various sectors: 

  • ArcSight puts out data security and compliance software. 
  • MAKO markets robotic surgical arms and implants used in orthopedic knee procedures. 
  • ReneSola is another Chinese solar energy play. 
  • Cascal is an overseas provider of water and wastewater services. 
  • ATA is a Chinese provider of computer-based learning.

It's about time
If the companies chose to go public next year, they might have been able to avoid the current downturn. Nevertheless, companies are taking their IT security seriously. Solar energy and Chinese stocks are currently out of favor, but the growth prospects in both camps are too strong to keep them down for too much longer.  

The latest batch of IPOs isn't indicative of crummy quality -- just a sign that investors aren't ready to take chances.

Sloppy returns are the quickest way to shut off the pipeline spigot. Investors aren't stupid. If they see that recent IPOs disappointed investors, why would they pony up for the next new offering? That dries up demand, which in turn drives offering prices lower during the underwriting process.

We have no problem admitting that we gravitate to IPOs -- even now, when the niche is quite uncool. Such investments are the best way for an early adopter to latch onto promising companies early in their growth cycle. We have recommended several fresh faces in the past to Motley Fool Rule Breakers subscribers, who appreciate fast-growing companies that are disrupting their respective industries. But finding those companies isn't as easy as it sounds. Investors now have to buy IPOs for the right reasons

Before the IPO became IP-Ouch
There was a time when even mediocre IPOs could count on an opening-day pop. Even the dogs held up relatively well, with underwriters lending support to even the laggards. That climate has clearly changed. Companies no longer feel that they've left money on the table by pricing their deals too low -- instead, investors are the ones leaving money on the counter.

This doesn't mean that investors should discredit the recent wave of lackluster debutantes. Sure, some will eventually disappear into obscurity -- it happens all the time. However, better days lie ahead as market sentiment comes back around. Once these companies get a few public quarters under their belts, to remind investors what their fundamentals can achieve, their share prices should rebound.

These minefields can be dangerous to navigate. However, smart minesweepers know that now is the time to strap on the protective gear and begin the disarming process of due diligence. It's the one way to make sure that you're ready when the time comes to buy back in.

Recently, Motley Fool Rule Breakers team visited Silicon Valley. To find out about businesses with high growth rates, you can sign up now, free, to receive dispatches from The Motley Fool Innovation Tour.

Prashant Rathore updated this article, originally written by Rick Munarriz and published on February 20, 2008. Prashant does not have any financial interest in the companies mentioned above. The Fool has a disclosure policy.