Warming Up With Holiday IPOs

There's nothing hotter on Wall Street than the debut of a very cool company.

Google (GOOG) got everyone going last year. Baidu.com (BIDU) did the same this year.

Are you ready for some brand-new issues for the holidays? Underwriters are standing by, just waiting for the right moment to unleash a few.

This week, they're unveiling the spiffy athletic gear maker Under Armour, with a deal that's supposed to price at $8 to $10, but will probably make its first trade in the high teens. And by year-end, fans of the Chipotle Mexican Grill will get a chance to roll some barbacoa burritos into their portfolios.

If you are a major client of a brokerage, you might be able to get a few hundred shares. Otherwise, you will just have to wait until they're in the so-called aftermarket and buy them at elevated prices with the rest of us schlubs.

Determining if these initial public offerings are worth buying is the hard part. There's no easy answer, because you have to first rub the stars out of your eyes and focus on real earnings metrics. Of which there are, basically, none. So the best way to pick up hot IPOs, I'm afraid, is to wait until they've cooled off.

Less Supply, More Demand

I've got some ideas along those lines. But first, let me note that the good thing about IPOs this year is that there have not been as many as last year. Indeed, if you accept the notion that broad market returns are as much about the overall supply of stocks as they are about demand for stocks, then you have the right to be optimistic today.

Nearly 10% fewer new issues have come on the market so far in 2005 than at the same point in 2004. And the difference in new issuance between today and the 1999-2000 period is huge, with the pace running about 65% behind those superheated fantasy years.