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There's More to the IPO Market Than Facebook (Nasdaq: FB)

By , Contributing Writer, Money Morning •

Admit it, you love the Facebook IPO (Nasdaq: FB).

Besides its $100 billion-plus stock valuation, the social media company has over 900 million active users worldwide.

Plus, at $16 billion, Facebook will go down as the second largest U.S. IPO ever, trailing only Visa's $17.9 billion deal in 2010.

But let's not forget, this isn't the first IPO that's gotten a ton of attention, and it won't be the last.

In fact, the hype surrounding Facebook stock is overshadowing the entire IPO market, clouding the big picture, and perhaps, some worthwhile investments.

So let's take a look at what else has been going on in the IPO market and what's coming up that deserves your attention.

Looking Back At the IPO Market

Debt troubles in Europe, a struggling U.S. economy, and heightened market volatility combined to depress new issues in 2011.

Overall, the U.S. IPO market clocked in with 338 offerings in 2011, down 29% from 2010, according to Renaissance Capital's Global IPO Review.

Still, the U.S. IPO market had its moments in 2011 - six deals topped more than a billion dollars and domestic volume was the highest since 2008.

But IPOs also significantly underperformed the broader market, taking an average loss of 12%. Two-thirds of them ended below their offer price.

As usual, the technology sector was front and center. In the U.S., 24 Internet companies went public, the most in over a decade.

Even still, that's pretty slim pickings compared to 1999, when 212 tech firms went public at the height of the dotcom craze.

The 2011 roster included cloud names and social media stalwarts like Groupon Inc. (Nasdaq: GRPN), LinkedIn Corp. (NYSE: LNKD) and Zynga Inc. (Nasdaq: ZNGA). Those three raised a combined $2.4 billion.

"The real head-turning constituent in the market has been tech and social media," John Demler, from analytics provider Ipreo, told Forbes. "But the real strength continues to be in consumers and financials, plus the energy sector."

GNC Holdings Inc. (NYSE: GNC), the specialty retailer that sells nutritional supplements, raised $360 million in March and ended up surging 74%. Luxury brand Michael Kors Holdings Ltd. (NYSE: KORS) jumped 57%.

Other top performers included energy-focused Tesoro Logistics LLP (NYSE: TLLP), and buyout target Kinder Morgan Mgt. LLC (NYSE: KMR).

Tech Continues to Dominate the IPO Market in 2012

In the first quarter of 2012, global IPO proceeds declined 66% year-over-year to $12.5 billion -- the lowest since the second quarter of 2009. Globally new issues fell a whopping 52%.

But that hasn't stopped the technology juggernaut from dominating the market again this year.

So far, 22 out of the 68 IPOs -- nearly a third of deals brought public -- have involved tech companies.

But get this -- approximately 85% of these tech IPOs are higher than their offering price, and a quarter rose by 50% or more. Altogether, tech deals returned a whopping 52% on average in the first quarter.

But most of these were smaller deals, including software firms such as Guidewire Software Inc. (NYSE: GWRE), up 140% from the offer price, and mobile internet firms such as Yelp Inc. (NYSE: YELP), up 78%.

Looking Ahead at the IPO Market

The rest of the year promises to feature "the haves and the have-nots," Paul Bard, director of research at Renaissance Capital, told Forbes.

While hot deals for high-profile companies like Groupon and Zynga will find buyers, investors will be reluctant to back businesses that rely on a big surge of economic growth.

Some names already in the IPO pipeline for 2012 include AMC Entertainment Inc., Kayak Software Corp. and Party City Holdings Inc.

Looking to cash in?

One way might be to play the "quiet-period bounce."

You see, analysts at underwriting firms who bring a company public can't make any comments for 25 business days after the stock is priced.

Since less than 15% of all analyst recommendations are to "sell," you can bank on a flurry of reports that will positively gush about a new company's prospects.

In general, positive Wall Street coverage can breathe new life into an underperforming IPO. The key is to focus on stocks that are still trading near or below their IPO price.

Another way to play the IPO market is the First Trust IPOX-100 ETF (NYSE: FPX), the first IPO ETF, launched in 2006.

FPX follows the IPOX-100 U.S. Index - a value-weighted index tracking the performance of the top 100 IPO companies by market capitalization.

It excludes the most volatile stocks but roughly reflects the returns from U.S. companies issuing stock for the first time like Facebook, LinkedIn and Zynga.

The fund managed to eek out a 3% gain in 2011 in a down market, and is up about 18% this year.

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