IPO Deals May Resurface by Labor Day: Menlow

Initial public offerings aren't dead, they're just in hiding, said David Menlow, president of IPOFinancial.com.

"They're really the most sensitive of all the financial instruments in the market," he said, in an interview on CNBC. "I think probably the best analogy I can give you is that IPOs are like the pigeons that people put into a mine to see if there's any gas."

During rough patches in the market, people often forget about IPOs, which are seen as more of a luxury, to focus more on their core positions, Menlow said. (For the full interview and examples of deals in the pipeline, watch the video.)

In the last quarter alone, 25 companies pulled the plug on their IPOs, according to Thomson Reuters.

But even though IPOs are in a slump, there are still 215 pending IPOs and secondary offerings in the pipeline. Of those, 82 percent are market debuts, he said.

Deals will begin to surface around Labor Day, but will likely be paired with valuation reductions.

"There are tremendous amounts of money that are laying on the sideline," Menlow said. "Everybody is just waiting."

IPOs are the key sentiment indicator for the future of the stock market, Menlow said. If they aren't revived "investors are going to say, 'This market is really ready to just fall over,' " he said.