IPO market can’t be ‘contained’

Investors are buying up just about anything with a ticker symbol, and that frenzy certainly includes stocks that are brand new to the market.

The Container Store, a retailer that sells organizational materials such as shelves and storage boxes, saw its shares more than double in value on the first day of trading after the initial public offering Friday. The powerful rally in the Container Store shares accompanies what's been the best year for IPOs since the last boom in 2007 and on pace to be the busiest since the Internet boom of 2000.

"The returns (of IPOs) are very strong, probably better than you might expect," said Kathleen Smith of Renaissance Capital. "No one expected IPOs to trade so well."

The performance of IPOs is starting to hit the kind of feverish pitch not seen since the last market peak in 2007, and it even has hints of the IPO heyday of the 2000 dot-com boom. The signs:

First-day pops. Container Store's first-day return is certainly one to remember, rising 101% from its $18 a share IPO price to $36.20 a share. Container Store was the fifth IPO to double in its first day of trading this year, the biggest year for 100% one-day jumps since 78 did it in 2000. Seeing stocks double on their first day has become rare. During 2012, just one IPO, a company named Splunk, doubled on its first day, said Jay Ritter, professor of finance at the University of Florida. No IPOs doubled on their first day in 2009, 2008 or 2007, Ritter said. IPOs on average have gained 16% on their first day this year, Renaissance said, the highest in at least a decade.

Strong deal pricing. Demand has been so strong for IPOs that underwriters aren't cutting the price to stoke demand. So far this year, just 28% of IPOs have been priced below their initial expected price range, showing a sign of strength not seen since 2009, Renaissance said.

Busy calendar of deals. Already this year, 182 companies have seen their shares start trading, up 50% from this point last year, said Renaissance. Th! is coming weekweek of 11/4, 10 IPOs are expected to hit the market, including the much-anticipated online message service Twitter. At the current pace, there could be 220 IPOs in 2013, making it the busiest year for IPOs since 2000 by topping the 217 deals in 2004, Renaissance said.

Some, though, worry investors are allowing themselves to get whipped into an IPO frenzy. Both Container Store and Twitter lose money, but that doesn't seem to discourage investors, says Francis Gaskins of IPO Desktop Premium. "A few years ago, investors only cared with companies did for them in the most recent quarter," Gaskins says. "Now they're buying off-the-wall projections of 12 to 24 months out."