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 six of the most recent companies to go public. Let's see if you can spot the nearly universal theme.




ArcSight (Nasdaq: ARST)




MAKO Surgical (Nasdaq: MAKO)




Asia Time (AMEX: TYM)




ReneSola (NYSE: SOL)




Cascal N.V. (NYSE: HOO)




ATA (Nasdaq: ATAI)




The four out of five dentists who prefer sugarless gum have nothing on the five out of six IPO investors who are currently in the hole. Yes, Asia Time is a brilliant exception. The Hong Kong maker of watch parts seems to have timed its IPO right, even though the recent sell-off in Chinese equities is still spooking the market. The other five companies to go public over the past three weeks, on the other hand, haven't proven to be as timely.

The five losers 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 had gone public a year ago -- or perhaps even a year from now -- those negative returns in the final column would probably have been positive. 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. It's 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 five of the last six 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.

I have no problem admitting that I gravitate to IPOs, even now, when the niche is quite uncool. It's the best way for an early adopter to latch onto promising companies early in their growth cycle. I 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.

It's not as easy as it sounds. Investors have to buy IPOs for the right reasons. Busted IPOs are as common as Jennifer Aniston hairdos these days. It's not just a 2008 fashion statement. Back in December, I took a look at five intriguing 2007 IPOs that were also trading below their original offer prices.

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. The 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. That happens all the time. However, better days lie ahead as market sentiment comes back around -- and these companies get a few public quarters under their belts to remind investors what their fundamentals are capable of achieving.

It's dangerous to walk these minefields. 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.

Longtime Fool contributor Rick Munarriz does not own shares in any of the companies mentioned in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.