American investors are eager for innovative public offerings, despite the fallout created by Facebook’s failed IPO launch in May.
Last week, the stock of security software company Palo Alto Networks popped 27% in its market debut. The stock of Kayak, the travel-booking website, jumped 28%.
There were also eight IPOs scheduled for this week: a security software maker from the Netherlands; a high-end steakhouse from Texas; and a natural-food grocery store chain from Lakewood, Colorado, among others.
The diversity of companies taking the plunge during the usually slow summer season shows that the market for IPOs is rebounding.
“The IPO market is back, for the time being,” says Francis Gaskins, president of researcher IPO desktop.
Though the companies going public are small, they also hail from various industries; meaning the market isn’t dependent on only one sector doing well. This was a major issue last year when a slew of high-profile Internet companies focused on social networking went public.
In current markets, investors are looking past the hype and focusing on growing companies.
Read: Invest in boring companies
“At best, this economy is flat, and it’s hard to find growth opportunities,” Gaskins says. He adds that both Kayak Software Corp. and Palo Alto Networks Inc. are growing their revenue and doing well.
He adds, “There are a few companies following in their footsteps and [despite negative press] tech stocks are the ones showing consecutive quarterly growth and good gross (profit) margins.”
He urges investors to consider Facebook began trading on the Friday that capped the worst week for the U.S. stock market in 2012. While the IPO market was frozen for five weeks following the company’s debut, it began to thaw in the last week of June when natural gas company EQT Midstream Partners went public.
Read: Facebook IPO provides lessons for Canadians
This month, Avast Software is looking to raise $90 million, Del Frisco’s Restaurant Group wants $105 million and Natural Grocers is aiming for $100 million.
The rest of the market looks even better. If startups are opening their books and courting wider investments, experts say, they’re likely upbeat about their future business and the economy.
Read: Small business mood signals growth
A strong market for IPOs could drive growth, as companies loaded with fresh cash hire new workers and support the economy.
“The market is a little stronger than people realized,” says John Fitzgibbon, the founder of IPOScoop.com.
There’s only one potential problem: the Vix index—known as Wall Street’s fear gauge—surged more than 21% this week as resurgent Eurozone fears weigh on global markets, reports Financial Times.
U.S. bankers are keeping a close watch on the index and many are using it to determine when to bring private companies to market. If it continues to spike, this could potential cause a drop in the number of new offerings on U.S. exchanges.
“The Vix is something we can’t ignore,” Brian Reilly, Barclays head of US equity capital markets, told Financial Times. While a reading of 18 or 19 isn’t a problem, a downward trend could mean heightened volatility and investor anxiety.