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IPO Frenzy Freezes As Four New Issues Fail To Debut Friday

After a red-hot first-quarter for IPOs, investors are throwing cold water on many new issues.

Zoe's Kitchen (ZOES), a fast casual restaurant chain, popped 65% in Friday's debut. But just four of eight companies slated to start trading made it out of the gate.

Enthusiasm for new issues has flagged with the overall market in a correction and several disappointing IPO debuts or post-debut stock action.

The 16 IPOs scheduled to price this past week were the most since the week of Dec. 11, 2006, according to Renaissance Capital. This followed 64 in the first quarter, the most active Q1 since the tech bubble of 2000.

Biotechs led with a record 26 listings in Q1. But two slated to launch Friday were delayed after Thursday's sickly debuts by Adamas Pharmaceuticals (ADMS) and Cerulean Pharma (CERU).

Biotech stocks in general have been under heavy pressure, including Biogen Idec (BIIB) and Alexion Pharmaceuticals (ALXN).

The recent IPO weakness in large part reflects the recent selloff among growth stocks. But many of the best candidates have already come public.

"Investors are now being picky about which companies they buy and at what price," said Linda Killian, portfolio manager for the Global IPO Fund at Renaissance Capital, an IPO investment and research firm.

The Renaissance IPO ETF (IPO), a portfolio of the largest, most liquid U.S.-listed newly public companies less than two years old, is down 12% from its March 6 peak.

"This week's IPO market could not escape the broader market's downturn as the vast majority of priced IPOs this week are currently trading moderately above, or below their offer p rices," according to comments from Ipreo, a market intelligence firm.

Among the IPOs delayed Friday was human resource manage ment firm Paycom Software (PAYC), now slated to trade Monday.

Also Friday, Phibro Animal Health (PAHC), which makes livestock drugs and nutrition products, priced at 15, below its expected range, but rose 13%. Farmland Partners (FPI), a farmland REIT, priced at its low end and fell 7%.

"The quality of IPOs has gone down," said Francis Gaskins, research director at Equities.com and founder of IPOdesktop. "The institutional buyers are also backing off.

The lack of enthusiasm began to show with the launch of King Digital (KING) on March 26. The maker of the hit mobile game "Candy Crush Saga" left a sour taste with investors as the IPO stock fell 15% in its debut. On Friday, shares fell 4% to 17.53 — 22% off its IPO price.

Some IPOs made great first impressions but quickly soured. Castlight Health (CSLT) leapt 149% to 39.80 in its March 14 debut. But the stock has since dived 57%, almost all the way back to its offering price.

Dicerna Pharmaceuticals (DRNA) and Coupons.com (COUP) have also sold off after strong openings.

"The underwriters are trying to push these IPOs out the door before it closes," Gaskins said.

Thirteen IPOs are slated to launch this coming week. They include Sina's (SINA) Weibo, a Chinese microblogging service similar to Twitter (TWTR) and Travelocity site owner Sabre.

Despite the recent struggles, it's not all gloom. In addition to Zoe's Restaurant, GrubHub (GRUB) popped 31% to 34 in its April 4 debut. The online portal for restaurant food delivery closed Friday at 33.68. Digital ad management firm Rubicon Project (RUBI) rose 34% to 20 in its April 2 IPO. It closed Friday at 19.71.