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It's the biggest week for IPOs in 8 years

April 9, 2014: 5:34 PM ET

It's the biggest week for initial public offerings since the end of 2006 with a whopping 16 companies scheduled to make their trading debut.

Forget April showers. This year it's April IPOs.

The question for investors is how to read this flurry.

The reality is all 16 IPOs probably won't happen this week. Investors have their limits, and anytime IPOs heat up, some wonder whether it's a repeat of late 1990s and year 2000 when companies, especially in the tech sector, were going public before they were ready.

Who can forget the Pets.com disaster?

Related: 10 big dot.com flops

Kathy Smith of IPO investment advisory firm Renaissance Capital says there shouldn't be major concern about the IPO market overheating, but it's clear there's going to be bit of a correction.

She said the best way to illustrate what's happening is to look at the Renaissance IPO ETF vs the S&P 500.

The chart shows the IPO ETF outperforming the S&P 500 for most of this year, but now it's actually underperforming the S&P 500, an indicator that there's some slowing of investor appetite for IPOs.

Smith says there's "a huge backlog" of IPOs that weren't launched because of the 2008 financial crisis and then other periods of drama such as the debt ceiling battles and shutdowns in Washington D.C.

Because everyone has been trying to jump back in, what we're currently seeing is the market "pushing back on price", according to Smith. But she thinks that the correction in IPO pricing is "healthy and necessary" as market forces play out.

A major flop at the end of March was the IPO for King Digital Entertainment (KING), the parent company of addictive online game Candy Crush. The stock dropped 15.5% on its first day of trading and is still below its IPO price.

This week there was a lot of attention on La Quinta Holdings (LQ), which ended its first day of trading Wednesday up slightly. The hotel chain priced the night before at $17 a share, below the expected $18 to $21 range.

Another good barometer of the IPO market will be Ally Financial (ALLY), which is expected to price in range of $25 to $28 per share and begin trading on Thursday. The old GM auto lending unit spin-off, which was bailed out by the U.S. Treasury, is predicted to raise $2.5 billion.

Related: Ally Financial IPO: victory for taxpayers, but don't buy the stock

The other key story this year is Chinese IPOs. On Wednesday iKang Healthcare Group (KANG), China largest provider of preventative healthcare, surged more than 8% higher after its IPO on the Nasdaq.

Investors have approached many of these Chinese company equities with curiosity and caution.

The next big Chinese IPO will be Weibo (WB). The company, which some have called the "Chinese Twitter," released SEC documents late last week showing that it was planning to offer 20 million shares at between $17 to $19 a share. The goal is to raise around $380 million.

Next week will see LeJu Holdings (LEJU), an online real estate services platform that plans to raise $200 million.

It's all a precursor to an even greater Chinese phenomenon that's expected to hit the market soon: Alibaba, which others have compared to a combination Amazon/eBay of the world's second biggest economy.

Alibaba, like many other companies, is hoping the IPO rush keeps running a little longer.

  • Ally Financial IPO is a taxpayer win, but don't buy the stock

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    The government is about to sell a big stake in Ally Financial, the auto loan giant formerly known as GMAC, through an initial public offering. It's a victory for taxpayers who had to bail the MORE

    - Apr 8, 2014 2:04 PM ET
    Posted in: , , , , ,
  • 5 questions Twitter must answer

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

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    The battle for the hottest IPOs among stock exchanges is fierce, and it looks like the New York Stock Exchange has won first prize.

    Early in the year, it looked like Nasdaq (NDAQ) would be a shoe-in, after it landed the Facebook (FB) listing.

    Of course, the Facebook IPO was an epic flop, and the New York Stock Exchange (NYX) ultimately edged ahead of its rival.

    The NYSE landed the majority, or MORE

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    Maybe Facebook (FB) stock will be trading much higher in May 2013 than where it is right now. Maybe not. But investors shouldn't dismiss all social media as a fad just because Facebook's IPO has so far been more FaceBust than FaceBoom. LinkedIn (LNKD), often described as a FaceBook for professionals, went public just about a year ago. It's stock surged on its first day of trading, gaining 109%. But MORE

    - May 23, 2012 10:06 AM ET
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