NEW YORK -- After surviving on a meager diet of venture capital money for its first three years of existence, Univax Biologics Inc. decided last year it needed to fatten up to develop commercial products.
So with no bank willing to lend money, the Rockville biotech company decided to go public and issue 3 million shares of stock this year at $11 a share.
"I don't know if we could have picked a better time to go public. The results were more than we had hoped for," Univax President Thomas Stagnaro said.
Other small companies -- considered the backbone of the current recovery -- have come to the same conclusion as 1992 has turned out to be a record year for capital raised through initial public offerings (IPOs).
This year, companies raised $25 billion by offering stock for the first time, a 50 percent jump over last year and 25 percent more than the previous record, set in 1986. The increase in IPOs also contributed to a record amount being raised by U.S. capital markets in 1992.
The surge in IPOs was fueled by investors' eagerness to buy stocks, which have generally returned more than certificates of deposit, bank accounts and other conservative investments, which have barely kept pace with inflation.
For their part, some companies have decided to complete an IPO this year to take advantage of all-time highs in the stock market, while others have been forced to seek capital from the stock market because loss-plagued banks were unwilling to lend money.
"The debt markets have not been open to new companies. This, combined with other investments being so unattractive, has caused investors to put record amounts into equity," said David Dipietro, a principal of Baltimore's Alex. Brown & Sons Inc., one of the nation's largest IPO underwriters.
Indeed, the booming market for IPOs was part of a larger trend: an unprecedented flow of newly issued stocks and bonds issued by capital-hungry companies, which will garner $838 billion through the sales this year, according to figures released Tuesday by Securities Data Co.
The previous record, set last year, was $600 billion.
Although tiny by comparison to the overall sales of stocks and bonds, IPOs are closely watched because they indicate the health of the many small, new companies that are one of the primary strengths of any economy.
The high number of these offerings has also made it possible for small companies to drive the current economic recovery.
As big companies continue to lay off workers, Univax, for example, has been hiring and growing. The Maryland corporation has increased to 115 people this year, from eight in 1988, and has recently moved into new offices.
The expansion came partly because of normal growth. But this year's spurt -- when Univax hired 80 new employees -- was made possible by its IPO, Mr. Stagnaro said. Strong investor demand meant the offering brought in nearly $10 million more than expected.
With Univax's finances bolstered by the $44 million shot of cash, its first product -- a medicine to help blood clotting -- is due to be licensed early next year, Mr. Stagnaro said.
Univax's experience also shows that while IPOs might be in hot demand, their sometimes shaky performance doesn't make them suitable for the fainthearted investor. After debuting at $12, for example, Univax's stock dipped down close to $5 a share. The stock closed yesterday at $11.50, up 25 cents, in over-the-counter trading.
Despite the risk, the interest in small companies continues unabated. Nearly 50 IPOs are due out next month, and if the market holds firm and the recovery continues, 1993 could be another record year.