Will U.S. IPO swoon go global? While 2007 was a record-setting year for public stock offerings worldwide, the economic morass in the U.S. has created a far bleaker outlook for 2008. That's spurred some investors to consider alternative ways to go public.

• Author: Sweeney, Paul
• Position: IPOs

First the good news on initial public offerings: the world's financial markets are coming off a record-setting year.

Through November 2007--and with December still not accounted for--more money was raised worldwide and more IPO deals were consummated than in any previous year. The record $255 billion raised in 1,739 IPOs in only 11 months of 2007 outstripped the $246 billion in financing generated by 1,729 IPO deals for all of 2006, reports international accounting firm Ernst & Young LLP.

In the U.S., moreover, last year was the most robust in a half-decade. "We're coming off a bumper crop" of IPOs, says Maria Pinelli, Americas director of strategic growth markets at E & Y. "We've seen very strong performance in both numbers and proceeds. We should all be standing up and celebrating. But, unfortunately, the markets are tentative now."

Indeed, the other shoe has dropped with a thud, especially in the U.S. market. "It's a whole new ball game," says Chris Kelly, a partner at Jones Day and head of the New York law firm's capital markets practice. The salad days of 2007--the $54 billion raised in domestic IPOs, according to Tampa, Fla.-based researcher IPOBoutique.com, easily surpassed the $43 billion for 2006--have come and gone. "Right now, it's slow here," Kelly says, "and people are down-in-the-mouth over what's happening."

Last year, as many as 15 newly public companies were being listed weekly on the domestic stock exchanges, notes Scott Sweet, managing director of IPOBoutique.com. The 234 listings in 2007, he says, constituted the most since 2004. But, as few as one or two companies per week have been going public in 2008. "In 35 years," he says, "and even in the worst of times, I have not seen numbers this small.

"Right now," Sweet adds, companies are "canceling, postponing or just not filing because of market conditions. IPOs are in a very difficult environment now. Institutional buyers need to monitor and maintain their core positions--so they're protecting capital rather than investing in IPOs, which are far more speculative."

The downturn reflects a refrain echoing throughout the world of finance. Market players who were on the verge of euphoria last year have come back to earth. Doug Fawell, co-head of equity capital markets for the Americas at global universal bank UBS AG, asserts that the quality of companies going public isn't the issue. The fate of the IPO market, he says, is determined by the state of the "macro environment."

Sour Outlook in U.S.

By all accounts, that environment looks dismal, particularly in the U.S. In the wake of the subprime mortgage crisis, as defaults and home foreclosures were mounting late last year, some lenders went belly-up and mortgage-lending giant Countrywide was teetering on bankruptcy. Banks and brokerage houses...