Tech Industry

Happy days for IPOs not here again

The good fortunes of Rambus and Amazon.com will not translate into a sudden surge of tech IPOs or secondary offerings, experts say.

Two IPO success stories don't make a trend, high-tech players say.

Though Rambus (RMBS) and Amazon.com (AMZN) soared more than 60 percent above their initial offering prices on the first day of trading, observers say a deluge of tech IPOs or secondary offerings is not forthcoming.

"Rambus and Amazon.com have proved the IPO window has not slammed shut, and there is still room for the higher-quality tech IPOs to still get through," said Lise Buyer, a vice president at fund manager T. Rowe Price Associates. "But I think institutional investors are still picking and choosing among the deals and not taking everything that comes along."

She added Rambus and Amazon.com were two special cases where there was a lot of "buzz" around the companies prior to their offerings. Buyer said Amazon.com in particular did a "spectacular" job in making a case for its company when it made presentations to institutional investors.

Meanwhile, Paul Kandel, small-cap portfolio manager for Dreyfus, said the market's performance, more than a few successful deals, will lead a rise in IPOs.

"IPOs, in general, lag the market. The market is rising and it will take a little while for the IPO window to totally reopen. We're starting to see the first signs that it's picking up now."

Companies that have filed a registration for an IPO or a secondary offering say the performance of Amazon.com and Rambus alone will not prompt them to launch their offerings.

"It won't impact us at all because we're on our own track," said Robert Hood, chief financial officer for Excite (XCIT), which has registered for a secondary offering.

He added investors will pick up the stock based on each company's merits, rather than invest in a company's offering based on how its sector is performing overall.

Excite still remains in a hold mode with its offering. "The registration is current, but we haven't yet decided what we'll do. We're not inclined to do anything at the moment," Hood said.

Industry watchers and participants say that they did not feel "money was left on the table" when Amazon.com and Rambus were priced. Based on the rocketing stock value from the target price for the first trade, one could question whether the target prices could have been higher and yielded more funds for the companies.

However, setting a target price is a balancing act. If it's set too high, buyers will stay away; if it's too low, the company may not receive a high capitalization, the basis of an IPO in the first place.

"I don't believe the issuers are being cheated by the underwriters, because the pricing models are appropriate given the market we are in," said David Menlow, president of IPO Financial Network.

Gary Harmon, Rambus's chief financial officer, said he believed the company's underwriters did a good job at pricing its offering and did not feel shortchanged.