The market for initial public offerings in the United States suffered its worst quarter since the third quarter of 2003, as canceled IPOs easily outpaced the number of new offerings, according to preliminary Thomson Reuters data.
The second quarter saw only 14 IPOs, raising $4.7 billion, slightly more than one-fourth of the proceeds from a year earlier and barely besting the third quarter of 2003 when 20 IPO's totaled $4.2 billion.
Perhaps more ominously, the number of new deals was dwarfed by the quarter's 25 IPO cancellations, as issuers preferred to wait for market conditions and the economy to improve.
Proceeds from the first quarter's IPOs totaled $20.6 billion, but almost all of that came from the $19 billion Visa offering.
The IPO data from Thomson Reuters exclude special purpose acquisition companies, which typically go public before purchasing an operating company.
But until the tight credit market and overall economy stabilize, there is little chance of seeing the IPO market rebound, experts say.
"Both corporations and investors are making the reasonable judgment that this market is unsettled," said Mark Hantho, head of equities and capital markets at Deutsche Bank.
"To wait it out is a more pragmatic approach." He added: "It's going to take time. For a bona fide lift in IPO activity, we will have to experience greater stability in the underlying equity markets."
The rare bright spots in the second quarter came from energy and power, and materials companies, making up four of the five largest deals.
The stock market's volatility and the weak post-offering performance of many issues is not helping, making cautious investors demand lower valuations.
That is feeding a vicious cycle that is prompting issuers to hold off on their IPO's until they can get better valuations.
The largest canceled IPO was the planned $400 million offering by IPC Systems Holdings, a communications systems company.
Enough companies are waiting to go public that Hantho sees a pipeline building.
According to Thomson Reuters data, there are currently 129 planned issues, representing over $23 billion in potential proceeds.
"The IPO market is a luxury item and investors need to feel more comfortable with their own core holdings before taking the bold step of trying to get higher returns through companies unseasoned in the financial markets," said David Menlow, president of IPOFinancial.com.
"It (the slowdown) shows that underwriters are keenly aware of problems in the marketplace and have gone back to issuers to give them a dose of reality," he said.
Investors will only come back once they see some companies perform well after an IPO, he added.
Those successes were few and far between.
The second quarter's two largest U.S. IPO's were the $1.25 billion American Water Works issuance, with shares up 9 percent so far, and fertilizer company Intrepid Potash's $960 million debut, up 29 percent.
Bankers don't expect the IPO market to pick up before the fall, with sectors such as health care and energy having the best odds of seeing successful IPO's.
The top underwriter for the quarter was Merrill Lynch , which was involved with four of the top offerings, totaling more than $1 billion, followed by Goldman Sachs Group , with three deals worth $868 million.
Despite the slowdown, the U.S. remained the largest market for IPOs in the world, with 14.8 percent of global IPO proceeds in the second quarter.
Following closely was Brazil with its about 13 percent share, propelled by a $4 billion energy IPO in June, but otherwise dogged by a high number of IPO cancellations.
Saudi Arabia was third with nearly 11 percent.
The second quarter ends Monday, June 30, but no U.S. IPO's are scheduled before then.