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Jekyll & Hyde IPO market: Withdrawals hit 3-year high, pending deals surge

October 19, 2011: 3:23 PM ET

The schizophrenia continues: We aren't going public now, but we will soon.

Bull and bear in front of the Frankfurt Stock ...

Bull or bear?

FORTUNE -- It's probably not a stunning revelation that an increase in IPO filings historically portends an improving economy. Late 2009 saw a strong uptick, for instance, which was followed by a great bull market in 2010, while the stagflation of the mid 1970s meant barely any IPOs saw daylight, especially during the dark days between 1974 and 1976.

So what to make of the latest IPO data? Ernst & Young reports that IPO withdrawals and delays have hit a three-year high, with 11 companies opting not to go public at all and 15 delaying their IPOs. That doesn't include a high-profile IPO from The Williams Companies (WMB) of its exploration unit that was called off yesterday. As you may recall, the last time so many IPOs were being spiked things weren't so great for the economy.

But at the same time, the pipeline for fourth quarter IPOs has been filling up, with 181 companies now coiled to jump into the market by year's end. According to Ernst's Herb Engert, who heads the firm's entrepreneur services business, 65 of those 181 companies have hopped in line in the past quarter alone. And there seems to be movement on the high profile wait list: just yesterday, All Things D reported that the somewhat snakebit IPO effort of daily deal pioneer Groupon is back on track with a roadshow starting Monday.

What to make of the mixed signals? Markets are easiest to deal with when they are decidedly bullish or bearish, but judging from the data, it seems we're in for more of the same -- some industries and companies being bullish while others are bearish. Bullish industries include energy and technology, just about half of all pending IPOs are in those sectors. Energy firms are poised to raise the biggest chunk money this quarter, $7.9 billion out of $32.5 billion projected. For all the gyration in energy prices, gasoline prices are still up markedly from a year ago, meaning excellent profits will be on the way for many companies, drumming up enthusiasm for the energy sector.

IPOs may be building up less because of fundamental economic strength and more because of a belief that years such as 2011, which see a weak market and poor performance by mutual funds and hedge funds as a group, tend to see stocks pushed higher by those funds through year-end to boost performance results. This could be corporate management seeing now as the best time to go public for a while.

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