Investors are still fairly leery of small companies going public.

These days investors are looking to companies that have an eye on the future -- those pioneering in digital media, mobile technology, clean tech and alternative energy, says Kathleen Smith, principal of IPO investment and research firm Renaissance Capital.

"But the market still needs track records," Smith says. Unlike what happened in the dot-com bubble, when Internet companies were barely making revenue, let alone profit, the key is to have positive revenue and earnings.

"The only ones that have managed to get through that do have losses are the biotech firms," Smith says. "They really are a different category. Investors are willing to look at that, but many of these IPOs come at great discounts of what the companies are hoping to raise primarily because some venture capitalists who invest in biotech firms are very impatient and want liquidity fast."

Of the 24 U.S. IPOs that have priced this year, the average return has been 10.5%, according to Renaissance Capital's website. Seven were in the health care sector, primarily biotech.

Excluding biotech, small firms with deals over $50 million are outperforming the larger IPOs this year, Smith says.

Smith notes that of the five companies already trading below their IPO prices, four underwent IPOs of less than $50 million and three are biotech firms.
  • Of the five companies, Tornier (TRNX), an Amsterdam-based orthopedic device specialist, was the largest deal at $166 million. Still, the stock closed Tuesday at $18.45 -- below the $19 IPO price it announced Feb. 2.
  • AcelRx Pharmaceuticals (ACRX), which debuted Friday, priced 8 million shares at $5 per share -- well below its expected trading range. The IPO raised gross proceeds of about $40 million. The stock closed Tuesday at $4.31.
  • Trunkbow International Holdings (TBOW), a Beijing-based mobile application provider that began trading Feb. 3, also priced its stock below the previously expected trading range at $5 per share. The IPO raised gross proceeds of $20 million. The stock closed Tuesday at $4.62.
  • Pacira Pharmaceuticals (PCRX) priced its $32 million IPO at $7 a share Feb. 3. The stock closed on Tuesday at $6.91.
  • Kips Bay Medical (KIPS) of Minneapolis priced shares at $8, raising gross proceeds of about $16.5 million. The stock closed Tuesday at $7.93.

-- Written by Laurie Kulikowski in New York.

To contact the writer of this article, click here: Laurie Kulikowski.

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