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IPO market rising from the dead?

With the successful launches of two tech-related IPOs two days in a row, some investors may be thinking the go-go market of a few years ago is back--but analysts say "not so fast."

With the successful launches of two tech-related initial public offerings two days in a row, some investors may be thinking the go-go IPO market of a few years ago is back.

Not so fast, say industry watchers. Although the performances of Tellium and Instinet last week were a good sign, the new IPO market has some significant differences from the days when a 100 percent first-day gain was a failure. Today, companies are happy to take a first-day gain of 20 percent.

There have been 36 IPOs so far this year, compared with 163 at this time a year ago, according to Thomson Financial Securities Data. And though two-thirds of IPOs last year were tech-related, there have only been about five this year, said Richard Peterson, market strategist for the company.

Tellium, an optical switch maker, went public last Thursday, rising as much as 46 percent from its opening price.

Instinet, a division of Reuters that matches stock buyers and sellers electronically, jumped 17 percent at the open of its offering on Friday, and rose as high as $18.25 before closing at $17.65.

"All we needed was a few offerings to confirm that the IPO market is ready to come back," said David Menlow, president of IPOfinancial.com. "We had that with a few issues but (Thursday's) offering of Tellium was probably the turning point for a lot of people."

Profits count
But Menlow points out that "this is a completely different market" than a year ago.

Although Tellium fits the standard tech IPO mold with no profits for the foreseeable future, Instinet is profitable. That's something investors are looking for these days, said Chuck Hill, director of research at First Call.

"I think we're certainly not back into the kind of climate where (profitless) companies could go public easily," he said. "What tech companies do get off in the next couple of months are ones that not only have earnings but pretty solid earnings."

That attitude may have scared off some highly anticipated wireless IPOs. The struggling shares of AT&T Wireless and Sprint PCS have put the kibosh on the IPOs of giants Verizon Wireless and Cingular Wireless.

Despite wireless reporting strong growth, their stocks haven't exactly been on a tear. AT&T Wireless, which raised $10 billion in what is still the largest U.S. IPO, closed Friday at $19.20, just a few dollars above its 52-week low of $16.38. And Sprint PCS has dropped 64 percent from its 52-week high of $65.88 to close Friday at $23.50.

Verizon and Cingular had announced intentions to go public but have since shied away because of tepid market conditions, even though both have been performing well financially.

Verizon filed for a $5 billion IPO in August 2000. Though the company is profitable--it recorded pro forma earnings of $659 million in 1999, and $289 million in the first six months of 2000, according to documents filed with the Securities and Exchange Commission--the company delayed the offering when the market went south. A spokeswoman for Verizon Wireless said it's still the company's intention to go public sometime this year.

Cingular, a joint venture between SBC Communications and BellSouth, was the fastest-growing wireless carrier last quarter, adding nearly 900,000 subscribers, overtaking industry leader Sprint. It's not known, however, if the company actually needs the money a public offering would bring.

Boring is beautiful
Many of the IPOs drawing attention right now are hardly what you would call sexy, Peterson said, pointing to the planned spinoff of Kraft Foods from Philip Morris in what will be the second-largest U.S. public offering.

"Basically you're not issuing growth shares as much as issuing value shares," he said. "There have been six energy related IPOs this year." And some of the spinoffs are large multibillion-dollar divisions of big companies, like Agere, which was spun off from Lucent, or Reliant Resources, a spinoff of Reliant Energy.

Two of the more highly anticipated offerings for this week are decidedly low-tech: Peabody Energy, a coal company, is expected to raise up to $360 million when it goes out, and Smith & Wollensky Restaurant Group, best known for its steakhouses, could raise up to $45 million.

Staff writer Ben Charny contributed to this report.