A cascade of big stock offerings
The deals for giant firms set for next week will mark the most active period for IPOs since 2007, an expert says.
WASHINGTON - In the world of new stock offerings, everything about next week is big: the number of deals, the amount of money expected to be raised, and the profiles of the companies going public.
The action is likely to draw a wide range of investors into the U.S. stock markets. If investors snap up stock of companies such as General Motors Co. and the casino operator Caesars Entertainment Corp., that could win over skittish traders who have taken refuge in the relative safety of bonds.
Stock in the week's biggest deal, General Motors, already may be scarce. Investment bankers handling the GM sale have more orders than stock for both the 365 million common shares and 60 million preferred shares that will be sold next week. The IPO marks the second coming of GM on Wall Street: The auto giant filed for bankruptcy last year and became a ward of the federal government, which still owns a large stake.
The market for initial public stock offerings has heated up and provided good returns. The FTSE Renaissance Composite IPO index, which tracks the performance of stocks that had IPOs in the last two years, is up nearly 13 percent this year. By comparison, the broad Standard & Poor's 500 index has gained 9 percent in that period.
Most recent IPO investments have come from large funds that specialize in initial public offerings of stocks.
But the U.S. government has said smaller investors would be able to participate in the offering of General Motors. However, brokerages that sell to smaller investors, including Charles Schwab and Scottrade, aren't taking part in the offering.
Fidelity Investments has an agreement with GM underwriter Deutsche Bank to sell shares to retail investors, spokesman Steve Austin said. But to place an order, investors must have at least $500,000 in assets with Fidelity, make 36 trades a year, or be a premium investor, which normally is for high-net-worth clients, Austin said.
Besides General Motors and Caesars, next week's big IPOs include the management consultant Booz Allen Hamilton Inc., the massive broker-dealer LPL Investment Holdings Inc., and the electronics-maker Aeroflex Holding Corp.
With 10 deals expected to come to market next week, it will be the most active period for IPOs since 2007, according to Renaissance data.
The offerings could raise about $12.5 billion. That's the biggest week since March 2008, when nearly $18 billion was raised through IPOs with Visa Inc.'s deal raising $17.86 billion of that.
The IPO market has improved steadily since August 2009. Before then, the sector was virtually frozen for nearly a year, when massive losses on mortgage bonds upended global credit markets.
David Menlow of the research firm IPOfinancial.com said marquee names such as General Motors and Booz Allen Hamilton would remind investors that some U.S. companies were poised for growth.
"There's significant cash on the sidelines that's now being redeployed," he said. "We're seeing higher levels of confidence on the part of the investors and in the larger quantity of deals coming to market."