Last Updated: December 7, 2015

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It’s long been said that IPO market is a leading indicator for the stock market. When demand for initial public offerings is weak, it suggests that investors are not all that interested in equities, and vice versa. Paradoxically, when interest and activity in the new issue arena reaches or recoils from bullish or bearish extremes, it can signal a contrarian turning point. Based on recent developments, it would seem that the new issue arena is indicating trouble ahead for share prices.

For one thing, activity has cooled significantly after last year’s impressive performance. In 2014, according to IPO adviser Renaissance Capital, there were a total of 273 launches in the U.S. IPO market, making it “the most active period of issuance since 406 companies went public in 2000.” Although proceeds were inflated by Alibaba’s $22 billion offering, the year’s $85 billion total was 55% higher than in 2013. In contrast, despite what occurred this past June, when there were 35 initial public offerings–representing the “most active month for IPOs since [the] 1999-2000 dot-com bubble“–2015 has been something of a bust. So far this year, Renaissance says, there have been 168 IPOs, well below the 2013 and 2014 totals, while the market is on track to raise $30 billion, “its lowest level since 2009.”

IPO Activity through 11/30

June 2015 IPO Activity

Blamed for the most part on “unfavorable market conditions,” a number of proposed deals have been pulled. In October, grocer Albertsons, which was expected to be valued at $2 billion, high-end retailer Neiman Marcus, and Caribbean telecommunications company Digicel announced they would delay offerings. Last month, consumer lender LoanDepot, with an expected valuation of up to $2.6 billion, and pickup truck accessory maker Truck Hero postponed planned IPOs. So far this month, Univision, owner of America’s dominant Spanish-language broadcaster, and sandwich chain Jimmy John’s have decided to wait. According to Renaissance, other IPOs that are likely to be delayed include Laureate Education, the largest for-profit higher education company, indoor cycling chain SoulCycle, academic publisher McGraw-Hill Education, and television-maker Vizio.

Forbes notes that of the 21 IPOs that priced from the end of August through mid-November, “15 had to settle for a valuation below their expectation or a smaller capital raise.” Then there are 2015’s high-profile, but less-than-stellar debuts, including the year’s largest, First Data Corp, which was priced at $16 in October but which subsequently fell towards $15. While the shares have since recovered to just under $17.50, they remain below the $18-$20 range that was indicated when the deal was first proposed. Another disappointment is Match Group, which initially surged by more than a third from its $12 launch price, but which has since pulled back to $13.11. Even Ferrari, which priced its shares at $52 and saw them race up to just under $61 on the first day of trading, has lost more than 6.5% during its first six weeks as a public company.

In fact, even some of 2014’s most well-received offerings have fared terribly this year. Among them are peer-to-peer consumer loan firm LendingClub, which is down more than 14% over the past 12 months, and small business lender On Deck Capital, which has collapsed 45% since its December debut.

An IPO benchmark shows just how much the sector’s fortunes have changed since the August swoon in equity prices. After outpacing the S&P 500 index during the first seven months of 2015, the Renaissance IPO index, which is a float-weighted index of U.S. IPO performance, is down on the year, and has lagged the U.S. equity bellwether by more than 7 percentage points since January.

US IPO Performance

To be sure, the news is not all bad. Research firm Zacks maintains that investors are “eagerly awaiting” an Uber IPO and that the app-based transportation company, which is valued at $51 billion after seven rounds of funding, “has been touted as one of the best future IPO candidates.” Moreover, some argue that bad news is good news as far as new offerings are concerned. CNBC‘s Bob Pisani notes that IPOs that had issue prices cut have held their own in secondary market trading. Writing in early November, he cited data showing that the deals that were launched after August, when pricing was more generous, performed better than those which debuted earlier.

Others would says that the landscape is simply shifting, because more firms that might have come to market are, as MarketWatch reports, “getting better offers from potential acquirers, including strategic rivals and financial firms.” According to a Wall Street Journal analysis, “at least 18 companies have stopped pursuing filed U.S. IPOs this year because they were being acquired, [which] amounts to about 10% of companies that filed for IPOs and either went public or sold themselves” in 2015. The newswire said that is “the highest share since 2012 and nearly double the rate in 2014.”

While the aforementioned points may reflect a temporary lull, it’s hard to look at all the other potential supply in the pipeline–including the various Unicorns, which I discussed in “Pre-IPOs: Square Slips Through a Growing Hole“–as well as the imminent change in Fed policy, which is unlikely to boost risk appetites, and think the recent indigestion is fleeting. More than likely, what we are seeing now is a case of déjà vu all over again.

Michael Panzner

Michael J. Panzner is a 30-year Wall Street veteran and the author of three books, including Financial Armageddon, which predicted the 2008 global financial crisis.