Even with the real-estate market mired in a slump, investors still clamored for shares of Zillow (NYSE: Z). On July 20, the real estate-focused website went public at an initial offering price of $20, opened in the low $30s and briefly spiked to $60 that same day, as more than five million shares traded hands. Two days later, the stock market began its most brutal sell-off in three years. Shares of Zillow have been losing steam ever since, now trading for less than half of that intra-day peak.

Initial public offerings (IPOs) have it especially hard at times like this. They often carry a thin stock float, which can propel shares quickly higher but can also lead to heavy selling pressure when sellers take root. In the case of  IPOs such as Zillow, investors are unlikely to find support from underlying fundamentals. For instance, Zillow had only $30 million in sales in 2010, yet at its peak, the stock was valued at more than $1.5 billion, or 50 times trailing sales. Yikes!

But there are many lagging IPOs with a more solid foundation underneath them. When the market finds its footing (and it always does), investors are likely to revisit these stocks. Here are three recent broken IPOs trading below their initial offering price that are set to rebound as soon as the market stabilizes.

1. Freescale Semiconductor (NYSE: FSL)
This chip maker, which was once the semiconductor arm of Motorola (NYSE: MSI) (NYSE: MMI) (which has since split itself into two separate companies), should be very grateful to have pulled off an $18 IPO in late May. This allowed the debt-laden firm to bolster its cash to a more comfortable level. Sure, debt still stands at a too-large $5.6 billion, but investors need not worry about any major bonds coming due in the next few years (other debt was recently refinanced, which extended the maturities on existing borrowings). Assuming the global economy doesn’t fall off a cliff, this balance-sheet rejiggering should give the company breathing room to generate cash flow and improve its debt ratio.

In the interim, investors should focus on the equity: The $18 IPO is now a $10 broken IPO, valuing the whole company at just $2.2 billion (a far cry from the $17.6 billion for which private equity firms acquired Freescale in 2006). Freescale sold $4.6 billion worth of embedded chips in 2010, meaning the stock now trades for less than half of sales — the lowest ratio of any major chip maker by far. The embedded chips go into a range of applications such as automotive electronics, wireless transmission devices and consumer appliances.

Freescale’s backers waited until a series of heavy investments in new products began to pay off. This appears to be the case now. Gross margins have risen for nine straight quarters (and after rising 450 basis points in the last year, they have reached 45.6%). Second-quarter sales grew 10% year-over-year and, coupled with the gross-margin gains, pushed operating income to $216 million in the second quarter, from $136 million in 2010 (though generally accepted accounting principles obscured much of the headway).

Freescale, after the sell-off, now trades for about $12.30, which is less than two times trailing earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.3 billion. This multiple can sharply expand when the company’s debt load starts to gradually lighten in coming quarters and investors gain confidence that the recent quarterly results can be sustained. This stock may struggle further in 2011, but could do very well in the next few years.

2. Boingo Wireless (Nasdaq: WIFI)
A limited history as a public company, coupled with a location in the land of high technology, is simply a painful place to be right now. Shares of this provider of public Wi-Fi services are getting hammered right now.

Back in mid-June, I suggested shares could get a pop from fresh analyst coverage  At the time, I was keen to see whether management could deliver on their promise of focusing on profits and not simply growth, for its own sake. Sure enough, second-quarter results showed $6.4 million in EBITDA and $1.4 million in net profits. Each of these metrics could improve in the third quarter, according to management. On a full-year basis, sales are now on track to rise more than 15% to about $93 million.

These numbers aren’t enough to protect the stock, which plunged 20% on Monday, Aug. 8, on no apparent news, only to rebound by nearly 7% on Tuesday, Aug. 8. As I noted earlier, new IPOs are especially vulnerable in market routs. But, if there is a silver lining, then Boingo at least now sports $82 million ($2.50 a share) in net cash, which will come in quite handy as the company looks to expand in these economically-challenged times.

3. Air Lease (NYSE: AL)
Even when a respected veteran is at the helm of an IPO, shares can suffer from a lack of respect. Steven Udvar-Hazy, who pioneered the concept of buying planes from manufacturers and leasing them to air carriers in the early 1970s, is not getting any respect right now. He subsequently sold his first business to AIG (NYSE: AIG) (now known as International Lease Finance) at a considerable profit. This year, he garnered a great deal of attention when he announced plans to take his new company, Air Lease, public. He made his investors rich once, so they hoped he could do it again.

He’s off to a rough start. The April 2011 IPO, priced at $26.50, bounced up toward the $30 mark this summer, but has recently tumbled all the way to $21.

Air Lease holds its quarterly conference call Thursday, Aug. 11. In all likelihood, the quarterly results might be far more solid than the lagging share price may imply. Of course, the weak stock may also be a reflection of more trouble ahead for the airline industry, but this firm owns a fleet of almost-new fuel-efficient planes and holds great appeal to airline carriers that need to unload their older inefficient planes and upgrade to new ones that consume less jet fuel.
 
Action to Take –>  These IPOs are getting sucked down into the market vortex, but they will most  likely see better days in coming quarters. Value investors should be quick and act before everyone else notices the appeal of these currently undervalued shares and sends prices back up.

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