There's at least one corner of the financial markets still struggling to pick itself up: initial public offerings.
Despite a powerful 49% rally in stocks off the bottom and a rebound in bond prices, IPOs remain anemic. Optimists say the IPO market's downward slide has at least slowed and they can see very early signs of repair. Skeptics are yet to be convinced.
The numbers aren't showing improvement. The number of IPOs to start trading this year is down 50% from last year through August, and the pipeline is relatively weak. Just 12 companies filed intentions to go public in July and nine in August, Renaissance Capital says. While that's up from the near-dead January-through-June period, it's on pace for the lowest annual number in more than a decade.
Still, there are signs IPOs might be beginning to emerge from a two-year hibernation, including:
•Successful recent record. It's easier to lure investors to buy IPOs when recent deals are working. The FTSE Renaissance IPO index is up 30% this year, topping all three major stock market indexes.
•Big deals in the pipeline. Hyatt Hotels filed its plans to go public earlier this month. Meanwhile, companies continue forging ahead with their plans. Only 38 companies have withdrawn their IPOs this year, much improved from the 59 that pulled their deals last year through August.
•Improved secondary offerings. Already-public companies raised $113.5 billion, or 30% more than at the end of August last year, from secondary offerings of stock to the public, Dealogic says. That's a rough indication of the market's readiness for new issues, says Francis Gaskins of IPOdesktop.com.
•Private-equity interest. A big supply of new companies will be from private investors looking to sell. KKR this month sold its stake in technology firm Avago in an IPO. KKR Thursday filed an IPO for retailer Dollar General.
•Toxic mortgage boom. There's been a rash of companies going public with the plan to use low-cost borrowed money to invest in beaten-up real estate investments, Renaissance's Linda Killian says.
•Trying again. Some of the companies that gave up on the IPO market last year are taking another shot. Vitamin Shoppe, for instance, pulled its IPO in February but refiled in May.
Some think IPOs aren't going to spring back overnight. Many investors still feel burned, says Robert Maltbie of Singular Research. With fewer investment banks, many aren't interested in dealing with IPOs of smaller companies that may not generate ample fees. "There's a real problem for smaller firms wanting to grow and raise money," Maltbie says. "It's not as easy as it used to be."