A Hot Market for IPOs Shows Itself ? At Least for a Week

NasdaqAmple free food and other perks are nice, but it?s stock options and lofty missions that often seduce people into joining tech startups.

That?s why Jeff Green will never forget the excited expressions on employees? faces last month when he told them their advertising software company would go public. It would open the door for them to cash in on their shares and signal that the company would aggressively chase its ambitions.

?They couldn?t believe that day had actually come and that we had made the decision and chose to do it,? said Green, chief executive of the Ventura, Calif.-based Trade Desk Inc.

Few startups ever reach the point where they can list on Nasdaq or the New York Stock Exchange. But initial public stock offerings have been an even rarer sight this year, which could see the fewest IPOs since the Great Recession. New listings are down about 50 percent from last year, and experts don?t see the floodgates opening until next year.

Companies have been scared off by financial crises in China and Europe and the unease surrounding the U.S. presidential election. They?re also getting pushed to achieve profitability before going public or accept a haircut in their valuation, investors say. And for most businesses, there?s been ample cash available to stay private longer.

Green, 39, fought past those concerns because he has a fast-growing enterprise that?s making money. Wall Street will never lose its hunger for that combination, he said.

Several other companies with healthy profit margins also made the leap in recent days, fueling the year?s busiest week for IPOs, according to money manager Renaissance Capital. Auto lubricant maker Valvoline had the largest of eight offerings, hauling in $660 million.

The group, including cosmetics products maker E.l.f. Beauty and IT software firm Apptio, raised more than $1.2 billion and all saw their share prices shoot up in public trading.

Investors say it?s a sign of a healthy appetite for risk, though much of the interest stems from persistent weak returns on other investment options. Many of the newly listed companies are trading at big premiums to peers that have been publicly traded for longer.

All but a dozen of the year?s nearly 80 IPOs are trading above their starting price, according to research firm FactSet.

?There?s a lot of cash around, and the alternatives in bonds and elsewhere are not very attractive,? said Todd Morgan, chairman of fund advisor Bel Air Investment Advisors. Investors ?are chasing the hot market. They expect all the IPOs will go up.?

It certainly worked out that way for Trade Desk. The company raised more than $78 million from the stock sale on Sept. 20, when shares were priced at $18 each. Shares traded up 76 percent to $31.69 on their first day on Nasdaq and closed at $27.77 on Monday.

Getting to market required years of preparation and a month of sweating over whether to pull the trigger, Green said.

?The day before we announced to employees a month ago, it felt like the day before marriage,? he said. ?I?ll go to married or divorced in the future, but I?ll never be a single again. Life will be different in some way.?

(Source: TNS)