Retail investors have been wary of the stock market since the 2008 financial crisis. But experts believe that the upcoming high profile IPOs of household names such as Chrysler Group LLC, Twitter Inc. and Alibaba Group Holding Ltd. could attract retail investors back to the market. The S&P 500 (INDEXSP:.INX) Index has set new record highs, the stock market is booming, but individual investors have shown little interest so far, say Matt Jarzemsky and Telis Demos of The Wall Street Journal. That’s because of the scary memories of 2008.
Retail investors showing confidence in the stock market
Now retail investors have started showing interest in the stock market again. According to Lipper, individual investors withdrew $431 billion from stock-focused mutual funds between 2008 and 2012. However, this year the scenario is different. They have poured in $151 billion more than what they have pulled out from the traditional stock-focused mutual funds year-to-date.
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The upcoming IPOs are likely to further boost retail investor sentiments. According to Dealogic, 156 companies have gone public this year so far. That’s an increase of 47% from the same period last year. It is the largest number of initial public offerings since 2007. Twitter Inc. has hired investment banks to launch an IPO in November this year. China’s largest e-commerce giant Alibaba Group Holding Ltd has expressed interest in listing its shares in New York in the first quarter of 2014.
Among other hot IPOs, world’s No.1 hotel chain Hilton Worldwide Holdings has begun the process to sell at least $1.25 billion of its shares in a public offering. Last week, Chrysler Group LLC filed a registration statement for its proposed offering. The online game maker Midasplayer International Holding Co has also submitted paperwork for IPO with SEC, people familiar with the matter told The Wall Street Journal.
Facebook made retail investors more skeptical of IPOs
Institutional investors have always been interested in IPOs. But that hasn’t always been the case with retail investors. Analysts were hoping that Facebook Inc (NASDAQ:FB)’s public offering last year would compel retail investors to drop their defensive moves and join the IPO crowd. But the social networking giant’s botched IPO and subsequent decline in its share prices made retail investors even more skeptical.
Facebook Inc (NASDAQ:FB) shares are now trading well above their IPO prices. And shares of many newly listed companies have easily outpaced the S&P 500 (INDEXSP:.INX). So, there is heightened expectation that retail investors could return. But there is still uncertainty in a section of the retail investor base.