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Demand for new tech stocks has been down for so long that even a trickle of fresh offerings is looking to industry insiders like a much-awaited upturn.
Amid signs of improvement in corporate IT spending and an extended rally in technology shares, private companies are casting away inhibition and attempting once again to raise cash through initial public offerings.
While the number of firms planning stock sales pales in comparison to the IPO boom of the late 1990s, volumes have accelerated in the last several months. The pace of new offerings is expected to pick up more sharply as the end of the year approaches.
"I don't think we have a recovery per se, but certainly the market is once again paying attention to the IPO market and the inherent values therein," said David Menlow, president of IPO Financial Network.
In contrast to a few years ago, companies going public today are typically profitable or nearly profitable, with a stable revenue stream, Menlow said. Investors, many of whom remember losing money speculating on pie-in-the-sky ventures with no earnings history, are demanding no less.
But for those who meet the qualifications, the money is there. In recent weeks, tech firms have raised hundreds of millions of dollars in new offerings, though not all have held on to gains logged in first-day trading.
Shares of Digital Theater Systems (DTSI), a top performer that went public in August, are up more than 30 percent from their first-day closing price. Encouraged by the warm reception, the developer of surround-sound technology announced on Halloween that it plans to sell an additional 1.5 million shares in a secondary stock offering.
The largest technology offering of the fall, AMIS Holdings (AMIS), a maker of semiconductors for industrial clients, raised $600 million in a late September debut. Shares of the company, which was profitable in 2002 but lost money in the first half of this year, have continued to trade close to their initial $20 offering price.
Other recently public tech firms, including iPass (IPAS), which provides connectivity to mobile workers; Netgear (NTGR), a developer of networking products; and InterVideo (IVII), a DVD software maker, are hovering somewhat below their first-day closing prices.
All in all, it's not looking like a robust turnaround yet, said Menlow. He said he won't consider the tech IPO market fully recovered until successful debuts by individual companies are followed by offerings from others in the same industry.
For now, IPO investors can take solace from the fact that there are plenty of would-be public companies waiting in the wings, and not just the much-talked-about-but-still-unofficial stock offering of online search firm Google.
Looking at the IPO calendar for the next several weeks, Menlow said he expects more companies to go public in the last quarter of the year than in the first three quarters combined.
The lineup includes some prominent players. In the Internet sector, the long-grounded offering of Orbitz, the online travel site founded by five U.S. airlines, is expected to take off by year-end. Other large offerings expected in the next several weeks include one from Synnex, an IT services contractor, for up to $86 million, and another from Tessera, a developer of semiconductor-packaging technology, for up to $83 million.
Still, disregarding the end-of-year rush, IPO volumes are down substantially from a year ago, said Richard Peterson, market strategist at Thomson Financial. In the first nine months of this year, only 33 companies completed initial offerings, compared with 67 in the same period last year.
Technology firms also haven't played the leading role in the new offerings lineup for some time. This year's largest offerings, Peterson said, were dominated by companies in financial services and real estate.
Meanwhile, technology, biotech and retail companies have played a secondary role -- a trend Peterson expects to continue, given investors' current tastes.
"Unless you're like Google and everyone's looking to you as a windfall, if you're a technology company or a biotech or a retailer, you really have to have a good argument to go public," he said.
