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With Two Post-Facebook Deals, Is the IPO Market Back?

Two initial public offerings opened to strong demand on Friday, capping off what will be the busiest week for public offerings since April.

Kayak Software, which previously aimed to price its offering between $22 and $25 a share, set its IPO at $26 on Thursday night, and opened higher by roughly 20 percent on Friday.
Palo Alto Networks priced at $42, above its expected range, which had been upped earlier this week — and opened to a rally of more than 30 percent.

Guitar-maker Fender Musical Instruments was expected to round out the group with a pricing Thursday night but instead withdrew its IPO, citing market conditions.

"Current market conditions and concerns about economic conditions in Europe do not support completing an initial public offering at what we believe to be an appropriate valuation at this time," Fender CEO Larry E. Thomas said in a statement.

Still, the Kayak and Palo Alto pricings — both of which priced above range — represent an uptick in activity following a two-month impasse in the IPO market, a stall that came immediate after the massive Facebook offering, which raised concerns about the health of the exchanges and IPO process amid a weak macroeconomic landscape.

Now, several companies are looking to raise over $700 million in proceeds from U.S. investors looking to put money to work in the IPO market — but those may represent only a select few of the companies potentially sidelined by market volatility.

“Small-cap growth [IPOs] appear to be working,” Drury told CNBC in an interview. “I think the market has to be tested for large, critical mass companies."

The $700 million being sought pales in comparison to the $16 billion raised by Facebook’s single offering two months ago, but it still represents a handful of companies pouncing on a window of opportunity. (The Russell 2000 Index , which measures small-cap stocks, has risen nearly 8 percent in the two months since Facebook’s offering, while the S&P 500 has rallied roughly 6 percent.)

Some of these small-cap names are finding extremely strong market reception, like Five Below . The pre-teen retailer — which only sells items priced $5 or less — priced at $17 a share, the high end of its range, only to trade up as much as a 70 percent during its first day of trading Thursday. Five Below raised $163 million in proceeds.

Durata Therapeutics didn’t fare as well. The biotech company, which is developing a treatment for acute skin infections, opted to issue more shares at a price below its previously disclosed range. But by the end of trading, Durata shares had barely broken the IPO price.

The weeks to come should see continued activity in the IPO market, with household names like Del Frisco’s steakhouse and the Manchester United football team hitting the road to market their deals to investors.

But with the incoming summer trading doldrums of August, a volatile geopolitical and financial crisis overseas, the looming November presidential elections, and a fiscal cliff approaching at year’s end, issuers are going to have to plan and price their deals carefully, according to market participants.

Whether or not the IPO market can thrive — or even survive — in those potentially choppy waters will be a key concern for investors, bankers, and issuers.

-By CNBC's Kayla Tausche and Jesse Bergman
@KaylaTausche
@JBergmanCNBC