2010 IPO season debuts Friday with a busy 6 deals, but analysts brace for disappointments

Big drops in Dow may hurt 6 IPOs slated for Friday

NEW YORK — This year’s IPO market will open Friday with 6 companies hoping to raise cash, the busiest debut day in more than two years,

Triple-digit stock drops this week, however, could spook potential investors and even lead to a postponed coming out party for some.

“We might end up having a little bit of a bloody day,” said David Menlow of IPOfinancial.

The Dow Jones industrial average has shed 300 points in two days, erasing all of the gains for 2010 and sending jitters throughout the market.

Making things worse for what some consider weaker IPOs, one company going public Friday may suck all of oxygen out of the room with its big-name sponsors.

Life insurer Symetra Financial Corp., which is making a $351 million offering, already has vote of confidence from Warren Buffett.

Buffett’s Berkshire Hathaway Corp. owns about a quarter of the privately held company and is not dumping that stake when it goes public Friday.

That could mean meager returns for other companies vying for scarce IPO money on Friday, said John Fitzgibbon of IPOScoop.com.

Still, if all the companies price their stocks on Thursday night, it will be the busiest IPO trading day since November 2007, according to data collected by Fitzgibbon and Renaissance Capital.

Conditions were so bad as the recession set in, even Symetra canceled its first IPO in November 2007.

In a sign of how much things have changed, Berkshire Hathaway and White Mountains Insurance Group Ltd., which also owns about a quarter of Symetra, have both changed their stance on the IPO and will hold onto their stakes this time around.

Buffett’s bet will certainly bring other investors on board, said Scott Sweet, an analyst with IPOBoutique.

The IPO market is better, for sure, but it’s still not as healthy as it was.

Symetra originally expected to sell shares for between $18 to $20 each; now they’re expected to fetch between $12 to $14 apiece.

Other IPOs scheduled to start trading this week include a $125 million offering from tissue maker Cellu Tissue Holdings Inc., two real estate investment trusts and two Chinese companies.

There’s a $200 million offering from Terreno Realty Corp., a newly organized company focused on industrial property, and a $150 million offering from Chesapeake Lodging Trust, an investment group formed to acquire upscale hotels.

Chesapeake was originally slated to start trading in early December with a $250 million IPO, but was among five companies that shelved offerings because of lingering doubts about the economy.

Two Chinese companies, Andatee China Marine Fuel Services Corp. and China Hydroelectric Corp., each hope to raise less than $100 million this week.

Investors, when they do come in for IPOs, are paying very close attention to fundamentals.

There is some apprehension over Cellu, based in Alpharetta, Ga., because of a heavy debt load and potential competition, said Sweet.

Cellu supplies private-label tissue paper to low-cost chains such as Dollar General and Walmart, as well as other tissue manufacturers and industry suppliers.

Cellu expects net proceeds of $29.4 million. Nearly three-quarters of the shares are being sold by the company’s shareholders, primarily its private-equity backers. The company plans to use funds it raises from the IPO to pay down debt. It carried $269.1 million in total debt at the end of November.

“Looks like this is a solid company,” said Fitzgibbon. But investor interest is focused on Symetra, overshadowing the other IPOs, he said, and a nervous market could make things even harder.

“The IPO investor has to feel certain as though they’re not swimming against the tide. That seems to be a quick summation of what’s happening right now,” Menlow said.