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Are Small-Cap IPOs Winning in 2013?

Most offerings have soared, but others have crashed


One of the nice surprises of 2013 has been the hot IPO market … and even small-cap deals have enjoyed a nice run. This has certainly gotten smaller Wall Street underwriters excited, and the president and director of equities at JMP Securities said in a recent interview that it points to rising investor confidence.

But is the big action really with small caps? Well, if you look at all the deals for 2013, those with market caps below $1 billion has an impressive average return of 18.16%. Here are the top five performers, with returns based off the offering price:

Company Ticker Return
Rally Software Development RALY 69.43%
Artisan Partners Asset Management APAM 74.63%
Tableau Software DATA 77.26%
Fairway Group FWM 77.62%
ExOne XONE 167.89%

The two cloud operators  — Rally (RALY) and Tableau (DATA) — are hardly a surprise, but there was some diversity. Fairway (FWM) is an organic grocer, Artisan Partners (APAM) is a financial services company and ExOne (XONE) is top player in the hot 3D printing market.

On the flipside, though, there were some small caps that were big busts. Take a look:

Company Ticker Return
Professional Diversity Network IPDN -38%
KaloBios Pharmaceuticals KBIO -37.38%
Health Insurance Innovations HIIQ -29.07%
LipoScience LPDX -25.22%
Marin Software MRIN -23.29%

Of course, that’s because small caps are often volatile. They can certainly have huge plunges even when the overall market are performing well .. and even if a company is in a hot space. After all, Marin Software is a cloud operator.

And while it’s hard to be disappointed with small caps, larger deals have done much better. So far this year, the average return has been 24.95%. In fact, Consider that there was only one deal fell below its offering price: Ply Gem (PGEM). And its return is still only a minor loss of 0.33%.

Here are the top five offerings:

Company Ticker Return
SeaWorld Entertainment SEAS 35.63%
ING U.S. VOYA 36.51%
Taminco TAM 36.87%
Bright Horizons Family Solutions BFAM 52.68%
Norwegian Cruise Line NCLH 63.16%

In other words, investors who have focused on on IPOs with market caps over $1 billion have done the best. Heck, it’s been nearly a can’t-lose proposition.

Even if investors seem to be warming up to small caps, they are still looking for established companies that can produce decent growth rates — and are not afraid to bid them up aggressively.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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