NEW YORK (AP) â¿¿ After a two-month rally in U.S. stock markets, IPO investors appear eager to buy into China's fast-paced growth and expanding middle class, and make selective bets on U.S. consumers' slowly rekindled desire to shop and dine out.
This week, tutoring service TAL Education Group is up 65 percent since its IPO, which raised $120 million. Handbag maker Vera Bradley Inc. also gained 68 percent this week after its $176 million IPO, while restaurant chain Bravo Brio Restaurant Group Inc. rose 21 percent. And prepaid debit card provider NetSpend Holdings Inc. raised $203.5 million and has risen 23 percent despite regulatory difficulties at its primary issuing bank.
Volatile markets and economic uncertainty tend to squelch demand for initial public offerings. After a steep spring decline and a turbulent summer, the Dow Jones industrial average has risen more than 3 percent so far in October after its best September since 1939.
The gain in U.S. markets has most benefited investors who bought into Chinese companies listing in the U.S. Chinese companies have chalked up some of the biggest returns of the past 12 months this autumn. But consumer companies serving Americans have also tiptoed back to the IPO market.
While the U.S. economy is growing only modestly, investors are salivating at the prospect of big returns in China, the world's No. 2 economy.
"You can't ignore the demographics and economics of what's happening in China," said David Menlow, an analyst with IPOfinancial. The World Bank expects the Chinese economy to grow 8.5 percent in 2011, while the U.S. economy expands at a much more modest 2.9 percent.
So investors may be more selective with U.S. consumer IPOs, which have not been common since the U.S. downturn began. Buyers have not suddenly decided Americans are once again ready to spend big at the mall, analysts said.