With another pair of eye-popping Silicon Valley IPOs Friday -- and three more initial public stock offerings slated for next week -- some observers are breaking out the B-word.
"Are we in a bubble? That's a very legitimate question," said Jay Ritter, a finance professor and IPO expert at the University of Florida.
Nationally, this year's IPOs have averaged much higher first-day gains than at any time since the dot-com pinnacle in 2000, Ritter said. The 80 percent increase Friday by Milpitas-based FireEye, and the nearly 94 percent rise by Redwood City's Rocket Fuel, only added to that trend.
"I don't think we're in any danger of getting back to the mania of 1999-2000," Ritter said, "but a lot of the companies are being valued very optimistically."
As long as Wall Street is buying, valley companies and their investment bankers figure to keep selling, with the IPO machine minting more millionaires for the foreseeable future.
Even officials at the Nasdaq exchange, on which FireEye and Rocket Fuel made their debuts, sounded awed after a record-setting week. The exchange has hosted 81 IPOs overall so far this year, a 10 percent uptick over all of 2012 -- and seven of them came out this week, collectively raising more than $890 million.
"Maybe 'frothy' gets to be a better word than bubble," said Nelson Griggs, Nasdaq's head of new listings. But, he acknowledged, it's been "by far the best year" since the financial crisis of 2007.
Perhaps even more enticing for stock watchers and valley denizens: The Nasdaq expects 11 more companies nationwide to go public next week, including San Francisco wind-power company Pattern Energy. Meanwhile, the rival New York Stock Exchange will host IPOs by RingCentral of San Mateo and Mountain View's Violin Memory.
Ritter thinks RingCentral, in particular, could see the kind of first-day run in its share price that FireEye and Rocket Fuel enjoyed. All three deliver software and services to corporate clients over the remote computing architecture known as the cloud, which provides lower costs for customers and predictable revenue streams for sellers.
And both Rocket Fuel and FireEye have exhibited the growth IPO investors crave. The latter has more than doubled its annual revenue in each of the past two years, while Rocket Fuel managed to double revenues to more than $100 million in 2012 and rake in nearly as much in the first six months of 2013.
Though neither has proved reliably profitable thus far, institutional investors didn't seem to mind. Both companies this week hiked the proposed price of their offerings after strong demand.
FireEye, a 9-year-old security software company led by former McAfee CEO Dave DeWalt, also increased the number of shares it offered. DeWalt, a 20-year valley veteran, admitted to being surprised by the robust reaction.
"The market cooperated really nicely this week," he said in an interview from Nasdaq's New York headquarters, where he rang the opening bell.
After pricing its shares at $20, FireEye ended the trading day at $36. The showing was so impressive that the CEO of San Jose-based cybersecurity startup ZScaler told Reuters he's moving up his IPO plans by six to nine months.
Meanwhile, Rocket Fuel -- founded by a team of former NASA scientists to offer big-data software that can target digital advertising dollars more effectively -- sold 4 million shares to institutional investors Thursday night, at the top of the revised range of $29.
The shares kept going up once public trading began Friday morning, ending the day at $56.10.
Ritter, the finance professor, noted that a big first-day "pop" in a stock's share price is no guarantee of future growth. At the same time, he said the companies that have come to market lately are a far cry from their dot-com predecessors, with a track record of paying customers.
Rocket Fuel and FireEye followed Wednesday's IPO by South San Francisco biotechnology company Five Prime Therapeutics. It was the first week to feature three Bay Area debuts since April 2012, when enterprise software companies Splunk, ProofPoint, and Infoblox went public just ahead of Facebook's record-breaking IPO.
Five Prime sold 4.8 million shares at $13 apiece before hitting the Nasdaq trading floor and has barely budged since, closing at $13.74 Friday. Still, Nasdaq officials say it's been a strong year for biotech IPOs, with 27 so far this year -- four times as many as all of 2012.
"You've got to ride it while it's hot," said the Nasdaq's Griggs, "and right now, it's a very good market."
Contact Peter Delevett at 408-271-3638; follow him at Twitter.com/mercwiretap. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.
Some venture capital firms along Menlo Park s Sand Hill Road are sitting pretty after Friday s soaring stock debuts by two Silicon Valley companies:
DAG Ventures -- Owns 9 percent of FireEye after its IPO, worth $379 million at the closing bell.
Mohr Davidow Ventures -- Owns a third of Rocket Fuel s stock, making it the largest stakeholder by far -- and adding $606 million to the firm s coffers.
Nokia Growth Partners -- With 8.3 percent of Rocket Fuel shares, the firm netted $151 million on the day.
Norwest Venture Partners -- Its 17.9 percent stake in FireEye is now worth $754 million.
Sequoia Capital -- The biggest shareholder in FireEye, its 18.5 percent stake is good for more than $779 million.
Source: Securities and Exchange Commission filings
well above average
12 percent -- Average first-day gain for all IPOs between 2000 and 2012
19 percent -- Average first-day gain so far for IPOs in 2013
56 percent -- Average first-day run-up in 2000, the height of the dot-com bubble
Source: Finance professor Jay Ritter, University of Florida