Bankers Brace For 2012 IPO Traffic Jam

A volatile issuance market and lackluster returns haven’t dampened the initial public offering mood on Wall Street.

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The current backlog of companies waiting to go public has swollen to unprecedented levels. While that pent-up demand is a potentially encouraging sign, it poses an overheating hazard that has some bankers drawing up contingency plans should things get too hot.

“Even though there is a very large pipeline, I don’t think you’ll see that rush to the gate once the window opens,” Joe Reece, Credit Suisse’s Global Head of Equity Capital Markets told CNBC in an phone interview.

“The last thing we, or any competitors, want to do is push too much through the funnel and push too many issues to the market. We believe there will be a great deal of focus on high quality issuers," Reece said.

Adding to the complicated IPO calculus is the precarious position of many US-listed IPOs trading underwater. Thanks to lackluster returns from Zynga, RenRen , and others companies that went public in 2011 are trading an average of 10 percent below their offering price, according to Renaissance Capital.

Barring a major rally in the IPO sector, 2011 will be only the second time in the last ten years that IPO performance lagged broader markets like the S&P 500 —a potentially troubling sign for companies waiting in the wings.

Another key factor for bankers, the backlog facing the market, also remains in question.

The current 180-day pipeline totals roughly $15 billion in proceeds, according to Dealogic. But that number could be much higher, according to bankers like Phil Drury, Citigroup’s co-head of Equity Capital Markets for the Americas, who estimates it at more than $28 billion.

“That [backlog] is unprecedented,” Drury told CNBC—and one that could grow significantly since companies that go public tend to complete deals that are larger than their initial fillings indicate.

To put that into context, the most active quarter ever in the US capital market history was the second quarter of 2000, when around $24 billion priced. So you can see the challenge and also the opportunity ahead,” he said.

It’s these complications and considerations that, if not navigated correctly, could wreak havoc in a number of sectors. One of the more notable segments of the IPO market that could face a queuing issue is technology, as Yelp and other emerging internet-related players may be faced with a flurry of competitors, including Facebook (the behemoth which is expecting to dominate investor interest if and when it comes to market).

But despite these overarching backlog concerns, bankers are quick to point out that broader macro factors such as the availability of capital and overall market volatility remain the key variables.

“Anytime you have companies in similar sectors trying to access the market. You need to be aware of the potential timing,” says Reece. “But it doesn’t rule out going public … it’s just a factor you need to consider.”

Follow Jesse Bergman on Twitter: @JBergmanCNBC