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The Little IPO Comeback That Wasn’t

I think I can... I think I can... So said the little train to try and boost its self-confidence in order to make it up the hill. Interestingly, a similar effort appears to be underway on Wall Street today, where a sudden burst of initial public offerings (IPOs) is being heralded as a thaw, or an indication that demand for new listings is back, following a two month post-Facebook (FB) drought.

The buzz, hope, and hype is based on the fact that four deals have priced in the past two days, collectively raising about $500 million dollars, including Five Below (FIVE), Durata Therapeutics (DRTX), Kayak Software (KYAK), and Palo Alto Networks (PANW). Had guitar maker Fender not gotten cold feet and pulled the plug on its planned deal, the tally would have topped $650 million. Certainly a lot of money by most measures, but truly a drop in the bucket in the rarefied world of Wall Street bankers.

"They're wee little deals. Facebook raised $16 billion," my co-host Jeff Macke says in the attached video clip, explaining that the pipeline of other pending deals for the second half of the year is equally disappointing. "At this time last year, $23.6 billion worth of deals were on the docket. It's about half that now."

While some had hoped that the aftermath of Facebook's clumsy debut would usher in an era of change, that does not appear to be happening — not in terms of the underwriting syndicates (the banks that actually finance and place the deals); the allocation of shares (who actually gets a piece of so-called "hot deals" that pop on the open); or the exchange listing, where four of the five aforementioned IPOs chose to list on the Nasdaq (NDAQ).

"Morgan Stanley (MS) damaged the market for IPOs. It really exposed... pulled back the curtain a little bit and saw that this is not free money," Macke says, adding that "the IPO market is not back, no matter what you read."

It's also worth noting that Facebook will face its first major test as a public company next week, when it releases its quarterly earnings results for the first time since listing in May.