In the world of new stock offerings, everything about next week is big: The number of deals, the amount of money expected to be raised and the profiles of the companies going public.
The action is likely to draw a wide range of investors into the U.S. stock market. If investors snap up stock of companies such as General Motors Co. and casino operator Caesars Entertainment Corp., that could win over skittish traders who have taken refuge in the relative safety of bonds.
Stock in the week's biggest deal, General Motors, already may be scarce. Investment bankers handling the GM sale have more orders than stock for both the 365 million common shares and 60 million preferred shares that will be sold on next week, a person briefed on the sale said Friday.
Orders for preferred stock amount to more than twice the number of shares, while orders for common stock are four to five times the number available, said the person, who spoke on condition of anonymity because he is not authorized to speak publicly about the sale. If demand remains high, GM could price the stock at the high end, or above, the $26 to $29 range it expects.
The market for initial public stock offerings has been heating up and providing good returns. The FTSE Renaissance Composite IPO index, which tracks the performance of stocks that had IPOs in the past two years, is up nearly 13 percent this year. By comparison, the broad Standard & Poor's 500 index has gained 9 percent in that period. Large institutional investors have snapped up most of the shares from new stock offerings.
The General Motors IPO could change that, said Kathleen Smith, an IPO expert and founder of investment advisor Renaissance Capital LLC. Most recent IPO investments have come from funds that specialize in initial public offerings of stocks, she said. After next week, Smith said, managers of smaller portfolios and non-specialists are likely to take an interest.
"This is going to be a consciousness-raising IPO for a broader group of investors who have not been particularly interested in the IPO market," Smith said.
But it could prove frustrating for retail investors who want to get in on the deal. The U.S. government has said that smaller investors will be able to participate in the offering of General Motors, which was rescued from near-collapse by taxpayer bailouts worth a combined $51 billion, but brokerages that sell to smaller investors including Charles Schwab and Scottrade aren't taking part in the offering.
Fidelity has an agreement with GM underwriter Deutsche Bank to sell shares to retail investors, said spokesman Steve Austin. But to place an order, investors must have at least $500,000 in assets with Fidelity, make 36 trades a year or be a premium investor, which normally is for high net-worth clients, Austin said.
Treasury spokesman Mark Paustenbach would not comment on small investors' access to the GM sale.
Besides General Motors and Caesars, next week's big IPOs include management consultant Booz Allen Hamilton Inc., the massive broker-dealer LPL Investment Holdings Inc. and electronics maker Aeroflex Holding Corp.
With 10 deals expected to come to market next week, it will be the most active period for IPOs since 2007, according to Renaissance data.
The offerings could raise about $12.5 billion. That's the biggest week since March 2008, when nearly $18 billion was raised through IPOs with Visa Inc.'s deal raising $17.86 billion of that.
The IPO market has improved steadily since August 2009. The sector had been almost frozen for nearly a year after massive losses on mortgage bonds upended global credit markets.
Chinese listings have fared especially well. Of the 10 2010 IPO stocks that have more than doubled from their offering prices, half are Chinese. Yet Chinese companies represent only one-fifth of the total IPOs, said David Menlow of the research firm IPOfinancial.com.
He said marquee names like General Motors and Booz Allen Hamilton will remind investors that some U.S. companies are poised for growth.
"There's significant cash on the sidelines that's now being redeployed," Menlow said. "We're seeing higher levels of confidence on the part of the investors and in the larger quantity of deals coming to market," he said.
Low bond yields also play a role. The Federal Reserve announced last week a plan to buy $600 billion in long-term Treasurys over the next eight months. By creating that extra demand, the Fed action drives down interest rates, making bonds less attractive to investors.
A lot of companies have postponed plans to go public, leading to an enormous backlog. Many were delayed because the companies had unrealistically high expectations for what their offerings should fetch. If next week's deals take off, more of those companies will go public in the coming quarters, analysts said.
Analysts don't expect a boom like the tech bubble of the late 1990s, when 100 deals or more came to market in some weeks.
But if the coming IPO wave draws attention and cash to U.S. companies, analysts said, that could spur more reinvestment in the nation's economy and into stocks of U.S. companies.
"If (GM) does well next week," said John Fitzgibbon, founder of research firm IPOScoop.com, "well — it's like honey attracts flies."