Box IPO Delay Won't Be the Last - These Two Factors Will Slow New Offerings

Investors interested in the high-profile Box IPO will now have to wait until 2015. The company announced Oct. 2 it will once again delay its initial public offering due to market volatility.

box ipoBox is one of the hottest tech companies in Silicon Valley. It's a rising star in the cloud computing industry - a field that Forrester Researchsays will grow to $241 billion by 2020. The IPO is expected to raise roughly $250 million.

But the company and Chief Executive Officer Aaron Levie want to wait until the market steadies itself before going public. All three major indexes fell in the two weeks before the delay. The Nasdaq Composite dropped 3.4%, the Dow Jones Industrial Average 2.8%, and the S&P 500 3.2%.

"Our plan continues to be to go public when it makes the most sense for Box and the market," Box spokeswoman Ashley Mayer told Bloomberg. "As always, investing in our customers, technology, and future growth remains our top priority."

This isn't the first time Box has delayed its IPO. In May, Levie decided to shelve the deal as the technology sector slumped. The Nasdaq fell nearly 6% from March through mid-May.

Markets have become even more volatile this week. The DJIA dropped 272 points on Tuesday, followed with the year's biggest daily gain on Wednesday. Thursday saw another 333-point drop.

This means Box won't be the only company backing out of a debut - which will bring a lackluster end to a blockbuster year. This has been the busiest year for IPOs since the dot-com era of 1999 through 2001, with 220 companies going public.

And it's not just market volatility that will slow down new offerings...

An Uneasy IPO Market Awaits

Another IPO cooling effect stems from the year's most exciting new stock: Alibaba Group Holding Ltd. (NYSE: BABA).

The deal raised $25 billion on Sept. 18 to rank as the largest initial public offering in history.

This makes for a hard act to follow...

Alibaba sucked a lot of momentum out of the IPO market in the weeks before its arrival. Only six companies held IPOs in the month leading up to the BABA offering. In the two weeks after, 20 IPOs followed.

Since Alibaba stock hit the market, IPOs have fared poorly.

According to Renaissance Capital, 10 of the 20 stocks that went public after BABA trade below their offer price. Those 20 combine for an average return of just 3.9% since they hit the market.

The 3.9% average includes Cyberark Software Ltd. (Nasdaq: CYBR), which has soared 83.6% from its offer price. Take that one stock out, and the other 19 have averaged a loss of 0.2%.

To put that in perspective, 2014's IPOs have averaged a 10.3% return from their offer prices. And that includes the poor performance of the last 20.

Forty-eight companies have filed for IPOs through September and October. However, if the markets remain this volatile, we expect more firms will delay until the start of 2015.

A Market Correction Is Coming Now: Money Morning's Chief Investment Strategist Keith Fitz-Gerald says a correction is near, thanks to the Fed. But investors don't need to panic. This correction will present excellent new buy-in opportunities...

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