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Demand Strong for This Week's IPOs

The initial public offerings slated for this week were set to raise around $1.1 billion, according to IPOscoop.com, but it’s looking like the number will be much higher come Friday’s close.

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The market is still awaiting the price tagged to GNC Acquisition Holdings, set to raise around $360 million later this week.

But investor demand for the two large deals already priced this week have surpassed expectations, as private equity firm Apollo Global Management and Chinese Internet security firm Qihoo 360 raised more money than planned.

For Qihoo, it was a lot more money. The Beijing-based internet security company raised its price range 20 percent to $14.50 per American depository share (ADS), from an earlier range of $10.50 to $12.50. Qihoo said in its filing with the Securities & Exchange Commission it would sell up to 12.1 million in ADS — or $139 million — but total orders came to $175 million.

The deal looks to be a “blowout” by all proportions—to borrow the term from a source involved in the deal, who mentioned its book was 40 times oversubscribed. But the four unnamed Chinese internet IPOs in the pipeline this year are not expected to fare as well, the source said.

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Part of the reason is that Qihoo is an industry leader. It boasts more than 300 million users and is the third-largest internet company in China. The US IPO was simply to allow access to investors with appetite for tech competitors like Google and Amazon.

The other is that it is catering to investor demand ahead of the pack.

"There is tremendous diversity in the IPO pipeline, which offers optionality to investors,” said Michael Benjamin, capital markets partner at law firm Shearman & Sterling.

According to data from Thomson Reuters, the $15 billion raised year-to-date in 2011 is already a 400 percent increase over the same period a year ago. Number of new issues has only risen 23 percent, the same data show.

Benjamin notes, however, that the diversity of the pipeline shows further strength for the market. “What it ends up creating is a 'price must be right' dynamic for the companies." At the right price, investors will side vote for Qihoo with their dollars. At the wrong price, investors may now feel comfortable waiting.

Apollo’s offering came years after its competitors BlackstoneGroup, Fortress Investment Group and KKR. But it was slated to come before a second wave of offerings this year, expected to include the Carlyle Group and Oaktree Capital Management.

“Earnings power for the group as a whole is accelerating, which will create opportunities for investors,” said Daniel Fannon, analyst at Jefferies & Co.

The $19-per-share deal priced at the high end of the $17 to $19 range, after Apollo lowered its previous range of $18 to $20 per share by a dollar.

Considering the offering used an over-allotment of more than three million shares—nudging the total raised to around $565 million versus the $473 million expected—it would seem the price for Apollo was right.

But at press time, shares in APO had yet to trade above the offer price.