Ebb & Flow

Last week saw a quartet of U.S. companies update their S-1 filings. Three of the four are seeking valuations north of the average $229 million mark for U.S. IPOs in this window. Bankers polled by Ebb & Flow think the loftier hopes reflect the strong performance of the 2006 IPO basket, which was up more than 40% last year. That performance is bringing new investors into the space, although bankers still aren’t seeing a flood of momentum investors.

Stelios Papadopoulos, retired vice chairman of Cowen,agreed that performance leads to increased interest. "Nothing is better for IPOs than recent deals doing well," he told Ebb & Flow. "In aggregate, the 2006 IPOs are up significantly and that should bode well about investor appetite for additional deals."

The good performance is also "making some new investors wander into the space," said Ben Perkins of Pacific Growth. "That helps drive demand."

Papadopoulos thinks the universe of biotech IPO buyers has not expanded to include "people who buy biotech IPOs once every several years." Instead, he thinks fewer core investors are sitting on the sidelines for new issues. "The conventional group of buyers has a lot of capacity in terms of total capital managed by them compared to the amount raised in a couple of IPOs," he said.

Matt Geller of Rodman & Renshaw suggested many private companies have been waiting for the IPO market to heat up. "Private companies have been running good trials and putting out good data," he said. "Their valuations have increased while they were waiting."

Going forward, Perkins expects the sector will see a flurry of S-1 filings. "For quality companies, you’ll see better valuations," he said. "But I think the market will continue to be strict about the number of companies it gives those valuations to."

Oliver Marti, a partner at hedge fund CCI Healthcare Partners, said he’s reserving judgment on whether the IPO space is hotting up until he sees some completed deals. "I’ll consider biotech IPOs as a hot

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