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New York. Two IPOs expected to start trading on Thursday were delayed as world financial markets continued to decline on concern about the pace of the global economic recovery — yet another sign of trouble for companies looking to sell shares to the public.

Insurer Patriot Risk Management and Penthouse magazine publisher FriendFinder Networks didn’t begin trading on Thursday, as was widely expected. They join a growing list of companies that have delayed their offerings, or accepted a lower price for their shares, to get the deals done.

Earlier this week, investment bank Imperial Capital Group postponed its IPO, a person familiar with the offering said. In January, real estate investment trust Terreno Realty and China-based Daqo New Energy, a solar energy company, shelved offerings.

“It’s looking more and more like it might be a bad sign,” said Nick Einhorn of Renaissance Capital, a Greenwich, Connecticut, IPO research firm. Some of the companies have had no operating history, heavy debt or slow sales growth — sore points that sliding stock markets are exacerbating.

“This is the kind of market where one or two important issues are enough to turn away a lot of investors,” Einhorn said. In a healthier market, many investors are willing to look past a few trouble spots.

Companies that make it to market haven’t fared well. Of the eight IPOs that have debuted this year, five are trading below their offering price. Only three have gained: Warren Buffett-linked insurer Symetra Financial is up about 6 percent; a Chinese maker of parts for household appliances, autos and consumer devices, China Electric Motor, is up about 3.5 percent; and drug developer Ironwood Pharmaceuticals, which launched Wednesday, is still up about 2 percent.

Investors are worried that possible defaults by debt-ridden European countries, high unemployment in the United States and efforts to tighten credit in China could hold back the global economic recovery. The Dow Jones industrial average has had eight triple-digit swings in the past 13 trading sessions, and is down about 4 percent so far in 2010.

“Retail investors, they’re probably still very cautious in the aftermath of what happened in 2008, despite last year’s rally,” said Richard Peterson, a credit analyst at Standard & Poor’s who follows IPOs.

“When investor sentiment is poor, there’s not much incentive to offer these shares.”

Patriot, a worker’s compensation insurance provider which had hoped to raise about $187 million in its offering, could price tonight or next week, said analysts who track IPOs. The company’s underwriters, FBR Capital Markets and Macquarie Securities, either refused to comment or did not respond to inquiries. The company did not return messages.

Meanwhile, Penthouse publisher FriendFinder, which was supposed to come to market in late January, managed to raise about $105 million on Wednesday night, but the start of trading has been delayed, according to John Fitzgibbon of IPOScoop.com, and Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles.

FriendFinder sold 15 million shares for $7 apiece, the IPO trackers said, citing bank sources. The company, which carries a heavy debt load, had initially wanted to sell 20 million shares for $10 to $12 each.

If FriendFinder and Patriot don’t start trading until next week, that will crowd the schedule — five other companies are scheduled to go public — and create more competition. That could lead more companies to trim or delay their offerings.

“If you have more deals trying to get out, it will create a problem,” Morreale said.

 

Associated Press