IPO logjam longest for four years

A logjam of US initial public offerings has stretched to its longest in four years while the number of companies withdrawing deals has increased.

Anxiety over the eurozone debt crisis and the economic slowdown has hit equity fundraising, dashing hopes of a revival that followed strong debuts for internet companies such as LinkedIn and Pandora.

“The analogy I would use is planes are circling the airport, but it’s not clear how many are going to be able to land,” said Dan Cummings, global head of equity capital markets at Bank of America Merrill Lynch.

According to Dealogic, the capital markets data provider, 146 companies, seeking to raise $28.4bn, are now on file with regulators to sell shares in the US, the longest queue since 2007. At this time last year it was 142 companies, seeking to raise $44.6bn.

But they also noted that 215 IPOs had been withdrawn or postponed so far this year, representing some $44.1bn. That is the most by September in at least 20 years, surpassing the previous high in 2008.

Companies such as Groupon, the online coupon-seller, and Zynga, the social network games maker, which had hoped to schedule offerings for just after Labor Day, September 5, are still monitoring the markets for signs that stresses will abate.

But volatility was a barrier to pricing deals, market participants said, noting that the CBOE Volatility Index, or the “Vix”, did not fall below its current elevated level, more than twice its historical average, even as the S&P 500 index rose more than 5 per cent last week.

Issuers fear losing the marketing cachet of seeing a big “pop” in shares in first-day trading if they happen to price on the day of a big decline in risk appetite.

The mixed performance of IPOs so far in 2011 is also weighing on the decision to go public. Two-thirds of new issues this year are now trading below their initial price, according to Dealogic.

That has made some investors hesitant to embrace new offerings. “Intermediate expectations are lower, and holding periods are going to be shorter,” said Lawrence Creatura, fund manager at Federated Investors.