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Market swings felt in IPO fundraising

NEW YORK – The stock market’s recent gyrations are taking their toll on some IPOs.

In a possible warning sign for the market for initial public stock offerings, five companies, ranging from former Home Depot arm HD Supply to Aratana, a developer of pet medicines, raised less money than they had hoped.

That’s mainly because of recent volatility in the stock market, said Greg Leffert, a research analyst for IPO research firm Renaissance Capital.

Stocks plunged last week after the Federal Reserve said it might cut back on its billions of dollars in stimulus spending this year. Shares have recovered in recent days, and the stocks of four of the newly public companies rose Thursday.

Despite the lower-than-expected proceeds from the five IPOs, Leffert said, demand remains strong, with more than 60 deals since the start of the second quarter. That’s the most in five years. He attributed that to increased investor optimism, market stability and pent-up demand for IPOs over the past couple years. “It’s definitely good that these were able to get done, and it bodes well for activity picking up in the next quarter,” Leffert said. On Thursday, Burlington Holdings Inc., owner of the Burlington Coat Factory store chain, said it was planning a $175 million IPO.

The recession that started in December 2007 shocked the IPO market, and deal volume has yet to return to the levels from before the financial crisis. Healthy IPO markets can reflect overall economic conditions and investor sentiment. They’re often used by small, new companies to generate the cash they need to expand.