This week, Solarwinds (NYSE: SWI) became the first venture capital-backed initial public offering (IPO) in more than nine months. That’s a significant event for those who watch the IPO market… it’s also significant for the rest of us – after all, IPOs can be a pretty good indicator of how the stock market is turning.

And in 2009, things haven’t been turning very fast…

In the first quarter of 2009, there were only two new IPO deals done globally; that’s compared to the 100 deals done in the first quarter of 2007. It wasn’t for a lack of eligible companies either: all told, 26 firms withdrew or postponed their initial public offerings this year. That’s no surprise given the global economic slowdown that started last year.

When companies are considering going public, how the market’s faring can have a big effect on them. That’s because the market dictates just how much capital a newly minted stock is able to raise. Investors in bear markets are a lot less likely to pony up as much cash to buy and IPO stock than those who are investing during a market rally. And studies have shown that the owners of private companies going public (venture capitalists and entrepreneurs) are much less likely to start the expensive underwriting process when times are tough.

Things haven’t been helped by the shakeup in the investment banking world. Since the financial meltdown started, some of the biggest underwriters (the firms that help take private companies public) have closed up shop – Lehman Brothers and Bear Stearns among them.

A Turnaround for the IPO Market?

Despite all of the barriers to new public companies right now, it looks like the IPO market is starting to catch some momentum once again. While Solarwinds may be the first venture-backed IPO in three quarters, it’s far from being the first IPO in 2009.

Since January, six large IPOs that have taken place in U.S. markets. Of those six, four have gone public in the last five weeks… That’s a pretty substantial increase in tempo.

And while other economic factors send mixed messages to investors on a daily basis, the warming up of the IPO market is one signal that’s decidedly bullish.

Small-Caps Lead the IPO Rally

Of the six new issues that have hit the markets this year, every single one has been a small cap. The names include highly anticipated offerings like language software developer Rosetta Stone (NYSE: RST), satellite imaging firm Digital Globe (NYSE: DGI), and for-profit college company Bridgepoint Education (NYSE: BPI).

Overall, these IPOs are a big win for small-cap investors. Not only do they provide exciting opportunities to invest in companies that have until now been private, they also suggest that the markets are receptive to a continuation of the rally that took a break last week.

Cheers,
Jonas Elmerraji

Source: Selling the Solarwinds IPO

For just a few bucks each month, I have access to daily current reports, water temperature charts and some pretty crazy satellite maps. If the technology is loved by the sportfishing industry, image what the defense and oil explorations sectors think.

The reason I mention Digital Globe is the company is about to go public. In just the fifth American IPO this year, the Colorado-based company will look to raise $250 million during its debut on May 14. The firm expects to get between $16 and $18 for its 14.7 million shares.

A successful IPO will not only be a boost for Digital Globe and its operation of two (soon to be three) high-resolution satellites, but also for its publicly traded competitor GeoEye (NASDAQ:GEOY). Shares of the company are surging today as investors begin speculating about the sector’s hype potential created by an IPO.

Keep an eye on the spies

Digital Globe’s public debut will be worth watching. I am almost positive you have already seen the company’s products. Log into Google (NASDAQ:GOOG) Earth or Microsoft’s (NASDAQ:MSFT) Visual Earth program and you will get a glimpse at the company’s capability.

But the firm’s satellite capabilities go far behind what is basically an Internet novelty. Nearly half of the company’s revenues are received through government accounts, chiefly from the National Geospatial-Intelligence Agency, which divvies the images to other government agencies.

Private sales account for the other half of the company’s revenue stream. They will likely be the focus of growth initiatives as defense-sector spending is questionable and unpredictable over the next four, maybe eight years. Companies like oil explorers, utilities, miners, emergency planners, farmers and of course, anglers can benefit from Digital Globe’s product lineup.

This is a dicey time to be entering the IPO market, but success is achievable. Just ask Rosetta Stone (NYSE:RST), which hit Wall Street on April 16 and ended its first day of trading with a 40% surge in share price. It was the strongest initial run in over a year.

There is a good chance Digital Globe and its intriguing product lineup will challenge Rosetta for its crown.

There are three ways to play the situation. Grab shares of GeoEye on dips next week hoping they will tag along on the ride. Or hold onto your money and invest in Digital Globe on May 14.

As an options trader, I like the idea of buying moderate-term call options on GeoEye, say the company’s June 25 calls (QZYFE). If the industry takes off on speculation of a strong IPO, these options will be selling for a hefty premium.

Just watch how you spend your profits. Big Brother may be watching.

Source: Profit From A Satellite IPO