IPOs Melt Away

The IPO market is wilting in the summer heat.

Over the past month, initial public offerings have gone from pops to flops. Since mid-June, nearly 20 companies hoping to tap the public market have either postponed or canceled plans for an IPO.

In fact, Wall Street has been so unwelcoming to new stock offerings that the number of completed IPOs over the last six weeks barely surpasses the number of deals that have been put on the back burner. Meanwhile, the deals that have made it to the market are often failing to impress, with many raising less money than anticipated.

A few notable IPOs experiencing trouble getting out of the starting gate include Alien Technology, a hardware manufacturer; Ryan Beck, the brokerage arm of BankAtlantic(BBX); and Gordon Biersch Brewery, a restaurant chain. Other deals, such as the $172.5 million offering for Crystal River Capital(CRZ) and the $187.5 million offering for Chart Industries(GTLS), have been forced to price their shares well below their target price in order to entice investors.

"We are in an environment with rising interest rates and a slowing economy," says Marc Pado, equity strategist at Cantor Fitzgerald. "We are facing a skeptical market."

But even if a deal does get done, investors aren't seeing much of a bounce in a company's newly minted shares. The average first-day performance, or pop, for IPOs in July was flat, according to data from Dealogic. That compares with a 5.8% average return in June and an 11.7% average return in January. For the year, IPOs, on average, have risen 7.1% on their first day of trading.

"The market is in a situation that you can't escape," says David Menlow, president of IPOfinancial.com. "Investors will shy away from IPOs even though they might have a higher degree of quality."