April 11 (Reuters) - Ally Financial Inc wanted the U.S. government sell its entire 36.8 percent stake in the auto lender on Thursday, but the IPO market wouldn't cooperate so it had to settle for less.
It's the kind of calculation that many issuers and their bankers are increasingly having to do as they watch the mood in the market change to caution from exuberance, to selective interest in high-quality companies from enthusiasm for just about any hopeful entity that stumbled onto an exchange.
"I think if we had pushed it to get them all the way out, closer to $5 billion, that would have been a staggeringly large IPO and a potential train wreck in the marketplace," said Ally Chief Executive Michael Carpenter.
Ally's shares priced at the lower end of a proposed range, and fell 4.1 percent on their debut on Thursday, though they recovered some of those losses on Friday. Carpenter said he expects the government, which sold all the shares in the $2.38 billion offering, to sell its remaining stake over the course of the year. [ID: nL3N0N23Z9]
Some investors and bankers said that while companies with a strong profile could still get deals done, they would have to be a lot more conservative about the valuations they expect. And those with little or no earnings, or unclear growth prospects, may put off their plans as they won't make it through.
"IPOs are generally a function of excitement and bullishness," said Jerry Jordan, manager of Jordan Opportunity Fund in Boston. "If you unwind the speculative part of the market and that's where the bulk of the IPOs are, it falls apart."
That could be a test for the 11 IPOs scheduled to price next week, which include such high-profile companies as investment bank Moelis & Co, travel services company Sabre Corp and Chinese microblogging site Weibo.
Bankers said it was too early to know how these companies will do, but everyone was watching market conditions closely.
Moelis declined to comment. Sabre and Weibo could not be immediately reached for comment.
The changing investor appetite would end a blockbuster run in the IPO market this year. So far, 85 U.S. IPOs have raised $18.3 billion, the most since 2000, according to Thomson Reuters data.
But investors are getting more discerning. Of the 29 deals in March, for example, five priced above their expected range, while only two came in below. In comparison, of the 16 deals priced so far in April, only one has priced above its range, while five have priced below, the data shows.
The change coincides with a pullback in the broader equity markets, as fears on Wall Street about over-stretched stock valuations increasingly push investors into safer sectors, such as utilities.
High-flying technology and biotechnology shares have borne the brunt of the pullback, with the tech-heavy Nasdaq composite index recording its biggest drop in two-and-a-half years on Thursday.
"The IPO market is now experiencing a higher level of discretion based on the fact that a number of deals were rushed to market in response to what has been a robust market," said Jim Cooney, head of healthcare equity capital markets at Bank of America Merrill Lynch.
Despite a more sober view in the market, there is still investor appetite for consumer, healthcare and restaurant companies, bankers said.
Shares of casual dining chain Zoe's Kitchen Inc, for example, rose as much as 73 percent in its market debut on Friday after pricing at the upper end of the expected range. [ID: nL3N0N33UO]
Bankers said a pullback in the technology sector also did not mean that all companies would run into trouble. Weibo and Chinese ecommerce companies Alibaba Group Holding Ltd and JD.com are still expected to appeal to investors when they list in the coming months.
A source familiar with JD.com's IPO plans said it was not thinking of delaying or changing its debut, which is expected in July. JD.com could not be immediately reached for comment.
Still, investors and bankers said there will be fewer successful IPOs.
Already some companies have delayed their listings.
Three IPOs, medical technology company Lombard Medical Inc, Greece-based shipping company Stalwart Tankers Inc and software company Paycom Software Inc, were postponed this week.
"The window is closing as we speak," said Kathleen Smith, a principal at Renaissance Capital, an IPO investment firm, told Reuters TV. "We have not been in a friendly market for a little while now." (Additional reporting by Peter Rudegeair and Rodrigo Campos in New York, and Elzio Barreto in Hong Kong; Editing by Paritosh Bansal, Martin Howell)