Considering the market's recent spastic behavior, you'd think companies planning their initial public offerings would turn and run the other way. But no.
As you might have expected, Stone Cold Steve Austin and his bulky buddies at the World Wrestling Federation (WWF) toughed out last week's bloody sell-off. But Martha Stewart? The lifestyle maven's Martha Stewart Living (MSO) came out Tuesday at $16 and closed over $35--several dollars higher than its expected price. Now she's a billionairess.
Networking, hardware and software stocks braved the market, too. Cysive (CYSV), Jacada (JCDA), and QuickLogic (QIK) all went public, and all were up, up, up.
Even IPOs that were stalled back in August's similarly squirrelly market came out swinging. Consider Women.com (WOMN). Delayed a few months ago, someone had the bright idea to unleash it among the mind-numbing sell-offs of October 15. But it easily achieved its $10 target share price and was up 85 percent by the end of the day.
You've got to wonder just what is going on here.
Maybe, says Ragingbull.com's Rick Spence, bankers are just plain exhausted.
"With tech stocks being so volatile, it's becoming harder and harder to time it to an upturn or a downturn," Spence says. "No one wants to get caught in the ups and downs anymore. It's like the weather: Just wait and it will change."
Or, says Jay Hoag of Technology Crossover Ventures, bankers are finally wising up: "The difference of a few dollars [in a downturn market] shouldn't matter that much."
Hoag says it doesn't make sense to delay an IPO in this unpredictable environment, especially for those companies that have already postponed their market debuts once. Besides, last week's downturn wasn't as serious or as long as August's to justify a delay anyway.
"You don't want to come off looking like the next Wired," Hoag says.
And bear in mind that a delayed IPO--one delayed IPO--is far from a death sentence. According to CommScan, the dozen or so companies that delayed their market christening brought a median return of 80 percent once they did go public. That's more than double the return the typical first-time IPO got this year.
Maybe it's because investors figure that any company that would pull an IPO because of market conditions can't be that desperate for cash. Think of it as corporate self-esteem.
Or maybe it has to do with the lower offering price a delayed IPO usually gets to make it seem more attractive.
Either way, if investors perceive it as a bargain, a big after-market rush could result. And that only feeds into the frenzy.
The bottom line for investors?
Do what lots of banks did this week and look the other way. "Unless you're a day trader, daily fluctuations shouldn't matter to you. Buy a stock based on the fundamentals. Buy long-term," Spence says.
Somewhere--probably in Connecticut--Martha Stewart is smiling.