Convertible Bonds Gain Following as Newest IPO-Entry Technique

The market for new issues may be so hot that investors will buy bonds just to guarantee an invitation to a company's IPO.

In an unusual twist, some investment bankers are engineering offerings that involve private companies selling bonds that convert into common stock, even though the companies have yet to even file for IPOs. The bonds then would be swapped for stock in an IPO.

At least two major Wall Street firms are talking to companies about issuing these so-called "going public convertibles," according to bankers at the firms. Neither banker wanted himself or his firm identified. One banker, who requested anonymity, says he already is talking to about a half-dozen tech and Internet companies about issuing convertible IPOs. He declined to name the companies involved. ...