May was a tumultuous month for the American Economy at large. With indicators reporting slowing growth in manufacturing and consumer confidence, free-falling home prices, and nauseating unemployment numbers, only one area of the economy was able to draw investors’ excitement and consistently display positive returns, that would be the IPO Market. According to one data tracker, May 2011 saw the most public offerings of any month in the past three years. The last month to see more activity in the IPO market than this May? November 2007, before the financial crisis even began.
So is the stunning activity on the IPO market, in a month that saw debuts from LinkedIn (NYSE:LNKD), Yandex (NASDAQ:YNDX), RenRen (NYSE:RENN), recent entry Solazyme (NASDAQ:SZYM), and many more, a harbinger of positive economic futures, or a lone stallion of optimism on an otherwise gloomy Wall Street pasture? Analysts and investors are weighing in.
According to Linda Killian, an analyst for Renaissance Capital, “The IPO market is very strong right now…There is pent-up demand for companies wanting to raise capital. You have a lot of young Chinese (NYSE:FXI) entrepreneurs who want to raise money in the U.S. We’re seeing more and more growth-oriented IPOs coming public… These are companies that plan to hire people, and that is a good thing.”
Renaissance believes the IPO boom has yet to subside, and projects an estimated 120 companies are in the process of preparing new IPOs in the coming months. With headliners such as Facebook and Zynga, the future of the IPO market should continue to drive demand as web 2.0 enterprises and social-media networkers make their publicly traded debuts.
Most of the IPO activity in May came from the technology sector, as these firms accounted for nearly 1/3 of IPO listings and generated some 57% of total capital ($4 billion) raised through IPOs last month. With firms such as Sabre Industries and Fusion-io expect to make public offerings in the coming weeks, the relentless IPO market continues to churn out activity.
For investing tips on upcoming IPO activity check out this exclusive Wall St. Cheat Sheet Feature: “3 Ways You Can Break the Bank on Web 2.0s Next Big IPO“