Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Will Rush for Ipos Have Happier Ending This Time Around?

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Will Rush for Ipos Have Happier Ending This Time Around?

Article excerpt

Some of the best loved financial fairy tales don't begin with the line "once upon a time," but with the comforting reassurance that, "It's different this time."

That appears to be the conventional thinking regarding what's not in store for stock investors based on the elevated appetite for initial public offerings.

In dollar terms, sales of shares in new companies totaled $83.9 billion through Dec. 4, approaching the previous peak of $92.6 billion in 2000, according to PricewaterhouseCoopers, a global accounting firm.

In sheer numbers, there were 288 public company debuts through Dec. 4, up from 238 for all of 2013 and the most since 2007, according to the firm. Add another 10 or 15 IPOs between now and the end of the year and you get pretty close to both records, said Derek Thomson, PwC's capital markets research leader.

The offerings include nine Pennsylvania companies that raised $4 billion, considerably more than the $1.2 billion that seven Pennsylvania companies raised through IPOs last year, Mr. Thomson said.

While PwC did not adjust the dollar figures for inflation, it's still interesting that the previous peaks - the dot-com bubble and the real estate bubble - were followed by some pretty lean years. There are any number of explanations, many of them eminently plausible, about why the aftermath of this year's IPO cornucopia won't involve the carnage that followed previous peaks.

"We think it's a different economic environment at the moment," said Mr. Thomson. "There's underlying strength in the [gross domestic product] and jobs numbers, and corporate earnings continue to improve."

It also helps that many companies took advantage of record low interest rates to refinance their debt, he added.

Linda Duessel, senior equity strategist for Federated Investors, also cited the improving economy as well as the fact that investors are putting a more realistic value on improving corporate earnings than they did in 2000.

Back then, the price/earnings ratio on the S&P 500 was 28.6. Today, it's about 18. While that might make stocks a little expensive, they still look attractive to the alternatives given that low interest rates may persist, Ms. …

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