A fourth-quarter flurry of initial public offerings has breathed fresh life into the market for new listings.

More than four dozen American and foreign companies listed on U.S. exchanges in the year’s final 13 weeks. And for the year, the IPO market saw more than twice as many deals as in 2009.
In fact, PwC counted 154 IPOs raising $37.5 billion in 2010, making it the busiest year in terms of stock debuts as well as dollars raised from the sales since 2007. And the average returns for new issues are the best since 2006.

One trader close to the IPO market says this year marked a “return to normalcy.” He noted the mix of successful small-cap companies such as RealD (RLD) and Fresh Market (TFM), with a plethora of foreign firms -- primarily from China -- and the world record listing by General Motors (GM).

The greater number of IPOs also produced a large number of pricing misses where stocks tumbled after the public premiere. Three dozen new listings have fallen 10% or more from the offer price this year. A source close to the market says, “We haven’t found equilibrium in the IPO market, but that’s part of the healing process.”

And the market seems to be finding its footing, as next year may be even busier for new offerings.

“We’re seeing a lot of pent-up demand and seeing companies building up the pipeline. All signs would indicate an upward movement here,” says Howard Friedman, a partner in PwC’s Transaction Services practice, which advises companies in the process of going public.

Barclays Capital estimates a 30% increase for new offerings in the new year; that would put IPO deal volume in at $50 billion.

On tap for 2011 IPOs are some household names that once traded but were taken private in the past few years.

“Big name IPOs will happen next year,” says Paul Bard, an analyst with Renaissance Capital in Greenwich, CT. The firm specializes in IPO research and manages a mutual fund that invests in new offerings.

“If Toys R Us has a big fourth quarter, then I expect them to move forward.”

Bard also sees private equity firms cashing in media tracker Nielsen, hospital operator HCA , and mobile chipmaker Freescale Semiconductor.

The analyst says these four names could create an IPO bonanza. “They could raise $10 billion in capital. That’s more than all private equity-backed deals this year raised.”

That said, investors are wary of buyouts coming back to a market saddled with debt.

“With private equity IPOs, it’s always buyer beware,” cautions Bard. “There are very established companies, so it will come down to price.”

Another source close to the IPO market is closely watching the pricing process: “It will be a hallmark year to see how these transactions price and trade. If the market holds its footing, we’re hoping to do more issuance than this year.”

Growth companies may fuel the pipeline as the economy tries to continue rebounding.

“Historically, in past cycles the best companies come out of bad times,” Bard says.
That has been the legacy of other economic contractions such as the double-dip recession of the early ‘80s.

The vaunted tech-heavy IPO class of ’86 -- Adobe Systems (NASDAQ:ADBE), EMC (EMC), Microsoft (MSFT), Oracle (ORCL) and Sun Microsystems -- rivals the quarterbacks of the storied NFL Draft of ’83 (Todd Blackledge, Tony Eason, John Elway, Jim Kelly, Dan Marino, and Ken O’Brien).

Now, 2011 could produce a high-profile class rivaling, at least in name value, that one from a quarter century ago. Investors are champing at the bit to buy shares of this generation’s big-brand tech innovators such as Facebook, Groupon, Hulu, LinkedIn or Twitter.

Still it’s not clear if any of these companies will go public next year. Market watchers say Facebook and Hulu may delay their respective public offerings, opting instead for more private placements.

IPO watchers are also keeping an eye on China. Chinese listings dominated the fourth quarter, a trend that’s expected to continue next year. Youku.com, known as the Youtube of China, and DangDang, akin to Amazon.com (AMZN), were leaders of the late-year Chinese offerings.

But as another IPO watcher noted, “the preponderance of US-listed American depositary receipts that are Chinese IPOs has added to volatility in after market performance.”
The big question is whether there’s enough demand to devour large deals after such a big year.

Some long-time IPO investors are bullish. 

“Yes, investors are ready for more stock,” says Ben Holmes of Morningnotes.com, which advises mutual and hedge funds on IPOs. “The market seems to be starved for them.”