IPO market is casualty of stock market pullback

Weibo, better known as China's answer to Twitter, was the big winner among five initial public offerings that made their debuts Thursday. Yet, it wasn't exactly a high-flying performance to make investors chirp.

The IPO market, which is coming off its best year since 2000, is showing unmistakable signs of returning to earth — the latest casualty of last week's stock market plunge, which prompted investors to dial back risk-taking.

That slowdown may take some of the excitement out of the coming IPO for Chinese e-commerce giant Alibaba, which could submit its official filing to U.S. regulators as early as next week. . It's being widely touted as the biggest IPO since Facebook raised more than $16 billion in May 2012.

The five IPOs that started trading Thursday posted an average return of just 8.7%, below the average 17% first-day pop so far this year and for 2013, according to IPO investment advisory firm Renaissance Capital.

Chinese microblogging site Weibo jumped 19.1%. Three of the deals were priced below their projected range, while two priced at the low end of the range. Chinese real estate site Leju rallied 18.6%, but travel industry player Sabre, sporting goods retail chain Sportsman's Warehouse and drugmaker Vital Therapies all finished flat or with low single-digit percentage gains.

The fact that Weibo had to price its IPO at $17, which was the bottom end of the $17 to $19 range, and slash the number of shares it was offering by more than 3 million, signals that the IPO market is coming back to earth, says Kathleen Smith, a principal at Renaissance Capital. She called it a "necessary correction."

The days of eye-opening day one pops, such as the 206.7% gain that Dicerna Pharmaceuticals posted on Jan. 30, and Castlight Health's 148.8% jump on March 14, seem to be fading.

The IPO market has lost some of its luster since a major correction in high-price biotech and Internet stocks last week. As the stock market goes, so goes the IPO market, says John Fi! tzgibbon, founder of IPOScoop.com. Last week, the Nasdaq suffered its worst weekly swoon in nearly two years and was down 9% from its recent high before rebounding.

"You need a healthy stock market to have a good IPO market," says Fitzgibbon. "The market (turbulence) is what put this (IPO rally) to bed this week. Without the wind at your sails, you can't go anywhere."

The more bearish tone is best illustrated by the recent performance of the Renaissance IPO Exchange Traded Fund. At its 2014 high on March 5, it was up 8.4% for the year. But it has since given up all

In the past week, the IPO market has gone from a seller's market favoring the bankers to a buyer's market that favors individual investors, says Josef Schuster, founder of IPOX Schuster.

The IPO window, he adds, hasn't closed completely, but if bankers want to get deals done, they'll have to price the shares more conservatively going forward. Alibaba's IPO might not be as gargantuan as many analysts believe due to the recent market jitters, he adds.

"It is definitely going to hurt Alibaba on its initial valuation," said Schuster.