February Sees Another Record in IPO-Land

Though the Dow's recent retreat has spurred talk that the bull market is on its last legs, February's record results show that the IPO market hasn't flagged one bit.

Following a record January, February brought a staggering $7.56 billion in proceeds for newly public companies. And the outlook for companies lining up at the trough in the coming months remains bright, though investors will note that the performance of big offerings this year has been a bit uneven.

Last month, 56 IPOs made it out of the gate, with proceeds nearly doubling the amount raised last February, according to Thomson Financial Securities Data. The biggest deals were Savvis Communications(SVVS), which raised $408 million; Intersil (ISIL), $500 million; Dobson Communications (DCEL), $550 million; and Carrier 1 International (CONE), $410 million.

The booming market isn't about to let up. Some 146 companies have filed to go public since the beginning of the year, compared with 69 filed at the same time last year. "I think it's a rush to get any deal out the door when the market's healthy," says Vincent Slavin, a sales trader who tracks IPOs for Cantor Fitzgerald.

Joe Hammer, head of the syndicate desk for Adams Harkness & Hill, says the market will continue to welcome big deals. "The size of the deals is probably going to continue to increase -- institutional investors like to see more liquid stocks, and the larger the offering, the more liquid the aftermarket," he says.

Even so, some of the biggest deals haven't been the best performers. Savvis Communications, a network services company that offered 17 million shares on Feb. 15, closed Tuesday at 20, 17% below its offer price. Wireless company Dobson Communications, which offered 25 million shares on Feb. 4, closed Tuesday at 19, 14% off its offer price.

More big deals are waiting in the wings. At the end of this month, MetLife will attempt to raise an estimated $255 million, and investors are expecting a big pop with Palm's IPO Thursday, which TheStreet.com wrote about earlier this week. The deal, underwritten by Goldman Sachs, will offer 23 million shares in the 30-32 price range, raising an estimated $736 million.

Investors continue to welcome young companies with strong growth prospects and to ignore the general lack of profitable track records. But not all sectors are faring well. E-commerce companies, which have fallen out of favor in recent months, are lagging behind. For instance, e-tailers Pets.com (IPET) and VarsityBooks.com (VSTY) are off 36% and 13%, respectively, since lackluster IPOs on Feb. 11 and 15.

But expect the IPO market to continue to flourish, at least for now.

>To order reprints of this article, click here: Reprints