Facebook makes weak IPO market weaker

After Facebook flopped in its market debut, investors are not liking new stock offerings.

Kayak, the discount travel website based in Norwalk, Conn., reportedly is postponing its initial public offering amid a rocky market for new stocks. The company's road show for investors, which was expected to begin soon, has been delayed, according to a person who asked not to be identified by the New York Times.

Not all initial public offering troubles can be pinned on Facebook, though. Europe's woes continue to lash the public markets, and as investors seek safety, relatively risky bets like new stocks are paying the price.

Facebook, by failing to instill confidence among investors and executives, has made a weak market weaker. No offerings have priced since Facebook's debut May 18. And as of Wednesday, only one company, Loyalty Alliance Enterprise, was set to go public any time in the near future.

"The current market is on hold," said James Krapfel, an analyst with Morningstar Research.

Subtract Facebook from the IPO data for the year to date, and 2012 is shaping up to be one of the worst years since 2007. So far this year, 73 companies have priced offerings, raising $29.1 billion, according to Thomson Reuters. Facebook alone accounts for $16 billion of those proceeds.

Several companies that successfully brought offerings to market this year, like the private equity firm Carlyle Group, priced below their expected range. Others, like BrightSource Energy and the aluminum products maker Aleris, withdrew their offerings altogether.

The sagging market for new offerings reflects diminished investor confidence in stocks. IPOs, experts say, are among the riskiest financial offerings one can invest in. Buying into a deal means making a bet on a relatively unproven management team and a company with limited insight into its financial performance.

One traditional way of enticing new investors is to price initial offerings at a small discount. But amid the turmoil of recent weeks, the institutions that buy shares in these deals are demanding progressively more protection against busted offerings. That translates into weaker pricing for IPOs, creating a gap that sellers are increasingly unwilling to bridge.

While a number of companies have offerings on file — including Michaels Stores, the arts and crafts retail giant; Fender Musical Instruments; Intelsat, a satellite operator; and Tampa's Bloomin' Brands, owner of the Outback Steakhouse chain — bankers say the owners are more likely to wait for markets to stabilize than to risk selling their holdings for far less than their worth.

"It's going to be a slow summer," Krapfel of Morningstar said.

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