IPOs Could Suffer Amid Tech Sell-Off

The dive in technology-related shares in the last week could thwart companies’ efforts to raise a planned $22 billion in stock sales this month, a level that was already threatening to swamp investor demand.

More than 150 companies are slated to sell shares in April--following last month’s record 161. Already, three companies have delayed initial public offerings and five have postponed secondary sales amid a 15% slide in the Nasdaq composite index the last six days.

“There’s too much need for capital out there,” said Chris Guinther, manager of Bank One Corp.’s small-cap fund. “The capital markets can’t continue to fund all the companies that went public last year and the IPOs that are coming.”

The sale plans follow a record first quarter in which companies sold $77.7 billion in new equity, according to Thomson Financial Securities Data. About $110 billion worth of stock was freed from lock-up, according to Richard Schmidt, a former money manager and author of the Stellar Stock Report.

The excess stock is already weighing on share performances. First-day pops dropped to about 89% in March from 130% in February.

Adding to companies’ own capital needs, executives and shareholders in newly listed businesses such as Breakaway Solutions Inc. (BWAY) and Calico Commerce Inc. (CLIC) will soon be freed from lock-ups that prevented them for selling for six months after IPOs.

“We’re always concerned the combination of lock-ups, IPOs and secondaries is bringing new supply into the market,” said Eric Efron, co-manager of the USAA Aggressive Growth Fund. “The more supply grows relative to demand, the more difficult it will be for markets and the new deals to appreciate.”