IPO Stars Lifting Mediocre Brethren

The hits keep on coming from the tech IPO market: athenahealth surged 97% on its first day in the market. Compellent Technologies rose 79%, VMWare (VMW Quote) jumped 76%, China Digital TV climbed 75% and Constant Contact (CTCT Quote) ran up 73%.

All of these IPOs debuted in the past three months -- a very choppy period for the stock market in general. Three of them debuted this month alone. And if you throw in Alibaba -- the Hong Kong IPO scheduled for next week that is so oversubscribed, it's certain to see a huge first-day pop -- you're seeing what I consider a rather disturbing trend.

Sure, lots of people love those first-day pops. For journalists, they make for good headlines. For companies going public, they generate free and positive publicity through those same headlines. And for underwriters, they stir up interest in the IPO market, paving the way for more deals.

Fair enough. But I can't help think that we're starting to see too much of a good thing. Renaissance Capital tracks aftermarket data on its IPOHome site, and crunching the numbers I found some interesting trends.

Since July 1, companies going public have risen an average of 19% on their first day of trading. That's more than twice as much as the 9% average first-day gain in the first six months of 2007. Lest you think that things are quieting down, consider this: In October alone, the average first-day pop was 27% over the offering price.