Investors' reactions mixed as IPOs make a comeback

Remember IPOs? They're back — sort of. Five initial public offerings started trading Thursday, making it the best week since December 2007 for companies selling stock for the first time, Renaissance Capital says.

But investors' reactions to the flurry of deals were uneven, as two of the five deals closed below their offering prices, showing how the comeback of new deals is likely to be rocky.

"It's not like the old times when the companies that needed the capital to emerge could (launch an) IPO," says Francis Gaskins of IPOdesktop. "Now they have to be emerging before the IPO."

It's easy to be encouraged by the uptick in deals. There have been six IPOs in September, topping the five in August and three in July, Renaissance says.

Still, Wall Street's reaction to the deals creeping out show investors are:

•Getting overloaded with certain types of deals. Companies set up to buy mortgages and invest in real estate are especially saturated, Renaissance's Linda Killian says. The day's losers, Colony Financial clny, down 2.5% to $19.50, and Apollo Commercial ari, down 7.5% to $18.50, are both real estate companies. Another real estate company, Foursquare Capital, delayed its IPO Thursday.

•Hungry for "green" IPOs. The day's biggest winner was A123 Systems aone, a high-tech battery maker, which saw its shares jump 50% to $20.29.

But that pop says more about the rush of mutual funds to invest in environmentally aware companies than the company itself, Killian says. The company is unprofitable, but funds are "piling onto this one," she says.

•Looking for larger companies. While many think of small upstarts as typical IPOs, investors now are looking for larger companies with more history, Gaskins says. Artio Global Investors art, for instance, was the day's second-best deal, rising 4.8% to $27.25. It was also among the largest, raising $650 million.

The average IPO deal raised $247 million this year, Renaissance says, which is down from the $650 million average IPO last year but higher than $219 million in 2007, $204 million in 2006 and $167 million in 2005.

The pipeline is still weak, as just 49 companies filed for IPOs this year, down from 146 at this point last year, Renaissance says.

Still, investors hope the IPO momentum can keep rolling as two more deals are expected to start trading today and four next week.

The IPO market is likely to recover a bit this year and become much more healthy by historical standards by 2010, says Tim Walker, analyst at Hoover's.

"It's been so slow, anything (as busy as) this week is a big deal," Walker says.