IPO Hardball!

May 23, 2020

This last week, buyers were back. On Tuesday, the Nasdaq had its biggest one-day point gain, 254 points. For the week, there was positive gain. Even the Queen of the Net, Mary Meeker, has proclaimed that the worst is over. Let’s hope so.

Shortened due to Good Friday, last week most investors could have gotten all the IPO stock they wanted at the IPO price. Here are last week’s IPOs, ranked by % change from the IPO price.

Embarcadero Tech, +60% to $16 from IPO price The San Francisco-based Embarcadero Technologies (EMBT) got the best reception. They lowered their initial price to $10 to raise $42 million. In the immediate aftermarket EMBT traded at $10 3/8, then moved up to close at $16.

Embarcadero Technologies helps companies with their enterprise and e-commerce databases. Its primary product, DBArtisan, works across multiple operating and hardware systems. Customers includ GTE, AT&T Wireless Services, Bank of America, and Universal Studios.

The lead underwriter was Donaldson, Lufkin & Jenrette.

360networks, +36% to $19 from IPO price On Thursday, 360networks (TSIX), a fiber-optic network builder, priced their IPO at $14, which was under the proposed $16 to $18 range. This was a shrewd move as 360networks rose 36% to 19 by the end of trading. In the New Net reality, such a rate of return is consider very good.

360networks is quite the fiber-optic builder. They project that by the end of 2001, their overall network will be approximately 56,300 route miles, mainly in North America and Europe. They are also building two fully protected undersea cables. One is a 7,600 route mile cable between America and Europe, and the other, a 14,000 route mile cable between South America and North America. Seems like there is lots of this cable already – but investors nonetheless are interested.

The co-Lead Managers were Goldman, Sachs and Donaldson, and Lufkin & Jenrette.

QS Communcations, +16% to $28 1/8 from the offering price QS Communications (QSCG) gave it a try on Wednesday. QS Communications rose 26 percent to 30 1/8 from its opening of $24.64. It was down to 28 ½ on Thursday.

QS Communications is a German provider of high-speed DSL Internet access for small and midsized businesses in Germany. QSC is constructing a network linking 40 German major cities. They project that by next year, they will serve over 20 million customers with full broadband service nation-wide.

The lead underwriter was Morgan Stanley Dean Witter.

Packard Biosciences, +1/8 to $9 1/8
Packard Biosciences (PBSC) priced at $9 Wednesday evening for Thursday trading.
The original filing price range was 16 to 18, so PBSC effectively cut in half its hoped-for IPO price.

Based in Meriden, CT, Packard Biosciences has a split personality, with 60% of its business life sciences research instrumentation and 40% in nuclear industry instrumentation.

Merrill Lynch was the lead underwriter

Rockford Corp, no change at $11
Rockford Corp (ROFO) priced Wednesday evening at $11, the bottom of its price range, for trading on Thursday and closed unchanged at $11.

Based in Tempe, Arizona Rockford designs, manufactures and distributes high-performance aftermarket car audio systems. ROFO is profitable, although on a quarter-to-quarter based sales and profits are declining.

Dain Rauscher was the lead underwriter.

PEC Solutions, -4% from IPO price to $9
PEC Solutions (PECS) just was not buff enough. Facing little investor interest, it had dropped its opening price. It wasn’t enough. It opened at 9 ½ and staggered to 9 by the end of the trading.

The Fairfax, Va., PEC Solutions provides Internet and security technology services mainly to government, often building their applications from the ground up, as well as integrating with legacy systems. They provide encryption programs to protect sensitive information, including biometric authentication, a process that identifies people by their physical characteristics. Definitely cool stuff. But it was not what investors wanted.

Donaldson, Lufkin & Jenrette was the lead underwriter.

PRE-IPO PRICE-TO-EARNINGS RANKINGS…as of Sunday 4/16
Of the 19 companies ranked Sunday 4/16 by Gaskins IPO Desktop, five of the top six successfully completed IPOs last week. The six successful companies, discussed above, are identified with an asterisk (*) before their name (below).
The rest were rescheduled, postponed or withdrawn.

Pre-IPOs ranked by Price-to-Earnings (Loss) ratios
Posted Sunday 4/16 by Gaskins IPO Desktop Recent qtr’s
IPO Price
(Mrkt Cap
NAME/symbol
Mrkt
Rated
Rev
Profit
to Profit
/ qtr profit
Cap
(mm)
(loss)
(Loss) Ratio
(loss)*4)
‘*’ = successful IPO the week of 4/17
LowerPrice/Earnings ratio is better
Four profitable companies 
*Rockford (ROFO)
127
C+
32
1.8
18
Qualstar (QBAK)
150
C+
11.1
1.7
22
*Embarcadero (EMBT)
332
C+
6.6
2*
41
*Pec Solutions (PECS)
350
C+
14.6
1.7
51
One breakeven company
*Packard Bio (PBSC)
1069.2
C+
65
0
breakeven
14 unprofitable companies
Lower ratio of Market Cap to Loss Rate (Price/Loss ) is better
…for example -149 is lower & better than -6
*360networks (TSIX)
14292
C+
100
-24
-149
ParadigmGen (PDGM)
382
C
0.6
-2.6
-37
Software Tech (STCS)
1224
B-
17.3
-9.5
-32
BirchTelecom (BRCH)
1618
C
15
-15
-27
Virologic Inc (VLGC)
315
C
0.3
-4
-20
Digitalwork (DWRK)
394
C+
1.1
-5.1
-19
Netjewels.com (NTJ)
66
C
0.4
-0.9
-18
Yupi Internet (YUPI)
641
C
1
-9
-18
Coolsavings (CSAV)
507
C+
6.7
-7.3
-17
Inventa Tech (INVA)
275
C
5.6
-4.1
-17
Crown Media (CRWN)
1313
C+
12.5
-24*
-14
Genomic Slns (GNSL)
386
C+
12.1
-11.1
-9
OneSoft Corp (ONSF)
287
C
4.3
-9.9*
-7
Techies.com (TCHS)
355
C
3.4
-15.9
-6
*excl non-cash chrg
Two non-edgar filings
Camtek (CAMT)
196
n/r
non-Edgar filing
*Qs Comm (QSCG)
tba
n/r
non-Edgar filing
‘*’ = successful IPO the week of 4/17
IPO Price to profit (loss) ratio = Market Cap / most recent quarter’s profit (loss) * 4
Business Model Rating Criteria…
A = high growth market, potential leader; B = more competitive market;
C = ‘public venture capital’

OpenTable ‘over the top’

May 10, 2020

OpenTable (OPEN)
+60% close = at this stage ‘over the top’
. IPO Priced at $20
. 54% more than the original range mid-point of last week
. raised $60mm
. trading Thursday, May 21
. Current price OPEN

IPO report updated with 1st day’s close IPO report

> either the below or it’s such a small offering ($60mm) that the trading is/could be about over enthusiastic ‘diner-investors’ getting nailed by funds who are bailing out of the IPO.
——————
Or perhaps
> It’s about defining & leading a growing market in the US at least, and about recurring revenue. On a comparative basis Salesforce.com (CRM) is the best-known recurring revenue high multiple Internet model. It’s a mature company with a trailing 12 months P/E of 113 or so.

but OPEN is defining a growing emerging market, has no apparent competitors that are at the same scale at least in the US, and has constructed some formidable entry barriers to competition such as 10,000 restaurant clients & 3mm reservations for the March 09 quarter.

And once the economy levels & and starts to grow, then OPEN’s growth rate should pick up. In climate of very visible restaurant closings, it’s surprising that OPEN generated a 5 quarters of sequential growth in top line revenue.

What happened here is they picked up market share and may have emerged as the major leader to whomever is second in their marketplace.

Investors are very much attracted to the recurring top line revenue growth generated by OpenTable. Recurring revenues are like the IPO ‘mother lode’ or ‘holy grail’ sought after by investors.

 

Recurring reservation revenues increased to 43% of revenue for the March quarter, up from 41% in the December quarter — during a time of many restaurant closings, suggesting that OPEN’s client base is includes mostly established, healthy restaurants.

 

In spite of the economic distress of the past year, OPEN has generated nice sequential growth in top line revenue for each of the past five quarters.

url: https://ipodesktop.blogspot.com


IPO Year In Review: Mkt Disappoints Despite Strong 4Q

May 2, 2020

IPO Year In Review: Mkt Disappoints Despite Strong 4Q
By Brian Coyle
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones), Jan 3 –The U.S. initial public offeringaftermarket closed out 2001 with a bang, as 32 offerings were priced in the fourthquarter, raising $11.06 billion.

This compares with 50 IPOs priced in the fourth quarter of 2000, raising $5.31 billion, according to Thomson Financial.

After closing out 2001 on a positive note, the potential IPOaftermarket for 2002 looks healthy, as spin-offs from establishedcompanies such as Verizon Communication’s (VZ) wireless unit, Citigroup Inc.’s(C) Travelers Property Casualty Corp. and Continental Airlines Inc.’s (CAL)ExpressJet Holdings Inc. prepare to come to market.

While the fourth quarter finished up with solid results, theoverall IPO market in 2001 was a disappointment. For the year, 98 IPOs werepriced, raising an estimated $36.05 billion in proceeds, according to ThomsonFinancial. For 2000, 384 IPOs came to market, raising roughly $58.89 billion.

Overall results for 2001 were down significantly from the pastfew years. IPOs in 2001 checked in with the lowest year for proceeds since1995, when 574 IPOs raised $32.6 billion. The year also marked the firsttime there weren’t at least a hundred IPOs in a year since 1979, when 62IPOs were priced.

In 2001, no IPO doubled its offering price in its first day oftrading. The nearest in 2001 was Simplex Solutions Inc. (SPLX), whichmakes software for integrated circuits, which rose 77% in early May. Theyear marked the first time since 1995, that there wasn’t a first-day doublefor an IPO, according to Thomson Financial.

Technology issues are expected to regain some momentum in 2002
after finishing up with solid returns at the end of 2001.

Francis Gaskins, Editor of IPOdesktop.com, said he believes the
market is back on track for a “normal IPO market” in 2002, with neither
the “excesses of the bubble nor the doldrums that followed.”

Gaskins also noted that “some companies are whizzing through
the IPO process in less than 60 days, so the backlog of IPOs is less of an
indicator of future activity than it once was when companies spent more time in
the pipeline.”

There are 31 IPOs on backlog for 2002, seeking to raise an estimated $8.2 billion
in proceeds, according data from Dealogic CommScan. This compares with 154
IPOs that were waiting to go public at the beginning of 2001. Of the 154 IPOs
planned for 2001, only 91 made it to market last year amid turbulent market conditions.

In mid-January, look for several health-related issues to kick-off aftermarket
pricing as Alliance Medical Corp. and Ribapharm Inc. plan to sell their initial shares.

Alliance Medical plans to sell 4 million shares at $14 to $16 a
share, while Ribapharm plans to offer 18 million shares at $13 to $15 a
share. Both deals will be done through lead underwriter UBS Warburg.

After a somewhat lackluster year for IPOs in 2000, the market
for new company listings in 2001 once again mirrored the overall stock
market’s poor performance.

For the year, the Dow Jones Industrial Average (DJIA) dropped
7% to close at 10021.50, marking the second consecutive year in which the
indicator fell. In 2000, the DJIA gave up 6.2%, compared with gains of 25% in
1999 and 16% in 1998.

Other stock market barometers also recorded significant losses
in 2001, with the tech-laden Nasdaq Composite Index falling 21% to close
at 1951.02, after plummeting more than 39% in 2000. The Standard & Poor’s
500 Stock Index declined 13% to close at 1148.16 for 2001.

IPOs Rebound In 4th Quarter
Despite lackluster performance in the IPO aftermarket throughout the year,
the fourth quarter finished up strongly, with several large offerings.

The year-end resurgence in offerings came as the IPO market had a
revival in performance in the wake of the September 11 terrorist attacks.

The September 11 attacks, combined with unpredictable market
conditions, caused a more than month-long drought in IPO pricings, the
longest such period in the last 25 years. When the IPO market returned
in October, however, the offerings began to outperform those deals priced
before September 11.

Prudential Financial Inc. (PRU) checked in with the largest
offering of the fourth quarter and the third-largest of the year, raising more
than $3 billion in proceeds through Goldman Sachs & Co. and Prudential Securities.

Other significant offerings in the fourth quarter included
insurance company Principal Financial Group Inc. (PFG), which raised $1.85
billion, reinsurance company Converium Holding AG (CHR), which raised $1.84
billion, and managed care provider Anthem Inc. (ATH), which raised $1.73 billion.


IPO Calendar Pre-IPO Ratings

April 23, 2020

Market
. Diabetes is the sixth leading casue of death by disease in the U.S.
. Blood glucose self-monitoring market is the largest medical self-test monitoring market
in the world…projected to grow from $3.5 billion in 2000 to $9 billion world-wide in 2005
. The U.S. market size in 2000 was $2 billion
. The current world-wide market is 90% controlled by four companies
Product
. THER’s product is called a ‘FreeStyle System’ kit that retails for a list price of $75
and includes a meter for reading test results, 10 lancets and 10 test strips
. The product is FDA cleared to be used on the thigh, upper arm & hand, and represents the
broadest array of off-finger sites cleared by the FDA
. A primary selling claim is that THER’s product is ‘painless’ relative to the competition
Distribution
. THER’s product is distributed in the U.S by nine of the ten largest retailers, including Walgreens,
Wal-Mart & CVS through wholesalers including McKesson, Cardinal Health & Bergen Brunswig
. THER’s product is in the process of being distributed in the Europe & Japan by the leading
distributors of insulin pumps…Disetronic in Europe & Nipro in Japan
. Diabetics who use insulin pumps are top prospects for the FreeStyle System
Direct to the consumer sales
. During the month of June end-users through telephone & web orders received $12.9 million
in product (all with a 30 day money-back guarantee), not recorded as sales until returns
are counted…we think only a small fraction were returned from June shipments
. On an annualized basis, June end-user gross sales were $155 million (not counting returns),
indicating a very healthy consumer product response
Competition
. Four companies control 90% of the worldwide market for blood glucose self-monitoring systems:
Roche Diagnostics, LifeScan (Johnson & Johnson), Bayer, MediSense (Abbot Labs)
CONTINUOUS GLUCOSE MONITORING SYSTEM
Two products from competing companies are approved by the FDA for continous monitoring
. A physician (not consumer product like Freestyle) product from MiniMed. MiniMed is in the
process of being acquired by Medtronic
. A prescription product from Cygnus, for adults over 18, which is not yet commercially viable
. A successful continuous glucose monitoring system could impact THER’s FreeStyle product
. THER is also developing a continuous glucose monitoring system
OTHER
. THER is 65% owned by venture capitalists pre-IPO
. THER has licenses but no patents, and is not currently involved in any litigation
. Use of proceeds: $50 million for sales & marketing, $10 million for R&D, $10 million for
manufacturing expansion, balance for working capital

IPO price change as of 10/26/01
Week of October 1
-38% Given Imaging 
GIVN, C
products for non-invasive analysis of the gastrointestinal tract
Yoqneam, Israel
1999 yr
2000 yr
June 6 mos
June Qtr Est
IPO Mrkt
Annual-
Revenue (mm)
0.0
0.0
0.0
0.0
Cap (mm)
ized rev.
Gross Profit %
0%
0%
0%
0%
301
multiple
Profit (loss)
-1.9
-7.5
-7.4
-4.00
@$12
n/a
Profit (loss) margin %
n/a
n/a
n/a
n/a
. R&D
2.2
4.1
2.6
. Marketing
0.1
2.9
4.3
. General & Admin
0.4
1.2
0.9
VALUATION RATIOS
Mrkt
Price /
Price /
Price /
Price /
% offered
Given Imaging (GIVN)
Cap (mm)
Sales
Earnings
BookValue
TangibleBV
in IPO
301
no sales
-19
3.8
3.9
20%
SCORECARD
Mgt
Market
Market Do-
Proprie-
Total
1-5, 5 is high
Growth
mination
tary
rating
20 is perfect
1
3
1
2
7
Management — no sales yet — 1
Market Growth — non-invasive analysis of the gastrointestinal tract — 3
Market Domination — no sales yet — 1
Proprietary — application of wireless & software technology to non-invasive analytical procedures — 2

Background
. Development stage (no sales) company incorporated in January, 1998
Product
The Given System
. Disposal imaging capsule that is swallowed by the patient at an out-patient clinic
. Wireless data is transmitted to a portable data recorder the patient carries during the next
seven hours
. Upon return of the portable data recorder, color imaging data is analyzed by proprietary software
on a computer workstation by the physician
Product focus
. Initial focus is on the analysis of the small intestinal tract
. Future gastgrointestinal tract diagnostic areas can include the esophagus,
the stomach and the colon (colonoscopy)
Installation & Payment Challenge
. GIVN’s expected profit is in the sale of disposable capsules
. Therefore, GIVN must widely install its computers & software, plus portable data recorders so that
it can sell disposable capsules (which transmit color images wirelessly to a portable data recorder)
Payment Challenge
. GIVN needs attract ‘early adopter’ physicians who can recommend the new approach
. GIVN also needs to convince third-party payors to pay, including government payors
such as Medicare and Medicaid, HMOs and other private insurers
Market
. The SMG Marketing Group estimates that more than one million procedures to examine
the small intestine will be performed in the U.S. in 2001 utilizing current diagnostic methods
. GIVN plans initially to sell in the U.S., Australia, New Zealand, Germany, France, Spain,
Portugal, Utaly& Belgium
FDA clearance
. In August 2001 GIVN received clearance from the FDA to market the Given System in the U.S.
as an additional tool (“adjunctive use”) in the detection of abnormalities of the small intestine
. GIVN will need to obtain additional FDA clearance before commercially distributing the Given
System for other intended users or for any other new products
Competition
. The current worldwide gastrointestinal endoscopy market is controlled by three companies:
Olympus, Asahi Optical (owner of the Pentax brand), and Fujinon
. GIVN is aware of R&D efforts by some of the above and other companies & individuals
to develo imaging capsules that may be competive to GIVN
Use of proceeds: inventory, R&D, manufacturing operations, capital expenditures, working capital


BloombergTV interview — Skype-hype from eBAY & the IPO Market

April 22, 2020

BloombertTV Interview http://bit.ly/ybtru

based on this blog
Skype-hype from eBAY & the IPO Market
(1) EBAY’s Skype-hype, not seen since Google
Skype-hype message to Wall Street – eBay focuses on core business
. Top line revenue — because of encroachment by Amazon & others.
. Balance sheet — to convert a soft asset into hard dollars
eBay is pre-conditioning the IPO market, very much pre-IPO. Similar to what Google did. That ploy only works for large, heavily branded companies, who can get away with it, not smaller emerging companies.

WHAT DOES SKYPE-HYPE MEAN?
When a well-known force (eBay) starts to pre-condition the IPO market for a division spin-off — in what is basically an IPO vacuum — then that’s a sign of an expected much stronger IPO market.

(2) Three successful IPOs this month, and all are up
ROSETTA STONE
. Popped 40% yesterday, up again today
. Generates good cash flow, public market segment leader
. Understandable growth plan includes overseas expansion – 95% of sales now are in the US
. High branded consumer awareness

BRIDGEPOINT EDUCATION
. 30% haircut in IPO price, rose a little from reduced IPO price
. Lots of sector headwinds in the post-secondary online education market segment
. Questions about the market leader Apollo (APOL) accounting practices sunk the segment since Feb 1
. APOL itself touched almost $90 in early Feb then sank to almost $60 this month.
. The bloom is off the rose in the online post secondary education sector

CHANGYOU
One trick gaming pony from China
Underpriced IPO at 7 times earnings

(3) IPO SIMILARITIES – all three are
. Profitable
. Generate positive cash flow, which means they are not crippled by too much interest and/or overhanging debt re-financing problems
. Computer-related
. Have high gross margins: Changyou (93%), Rosetta Stone (87%), Bridgepoint Education (71%)

(4) IN GENERAL, WHAT DOES IT MEAN?
Investors are now very much aware of IPOs, especially because of Rosetta Stone’s success and because of eBay’s ‘Skype-hype”

Up until sometime in March many investors simply did not want to hear about IPOs. But if investors think they can look forward to getting in on a potentially ‘in demand’ (hot) IPO from Skype then they will also look at other IPOS in the meantime.

(5) IPO CRITERIA
Right now (and this applies to Skype, also) a successful IPO appears to need
. High gross margins
. Top line revenue increases going into the IPO, with a believable growth plan for top line revenue
. Profits
. Positive cash flow
. Very little overhanging debt

In other words, back to basic investing principles. Because ‘pie in the sky’ dreamy prognostications.have no credibility in this market.

(6) IPO PIPELINE
. Not too much in the pipeline right now
. However, there are many companies standing outside & looking into the IPO window. Those that have a good March quarter and meet the above criteria (#5 above) may be able to step through the window and actually IPO
. If their March quarter numbers good and if they push it, it is possible qualified companies can IPO by the end of the second quarter, June 30, 2009 or shortly thereafter.
. The summer IPO season ends the second week in August, so I expect to see some interesting IPO filings in the next month or so.

Disclosure: no positions

url: https://ipodesktop.blogspot.com/


Rosetta Stone’s IPO (RST) is better than Bridgepoint Education’s IPO (BPI)

March 22, 2020

IPO Analysis, Grading, Scoring from IPOdesktop.com
Rosetta Stone IPO: http://bit.ly/18evtp
Bridgepoint Ed IPO: http://bit.ly/4DhEsY
both scheduled for April 13wk

SIMILARITIES: RST & BPI
(1) Both are educational stocks
. Rosetta Stone provides language learning software
. Bridgepoint Ed provides post-secondary online education

(2) Both report revenues for 2008 in the $200mm range & both were profitable in 2008

(3) Both have good internal growth track records

(4) The trailing 12 mos P/E ratios are in the same range at price range mid-points: 23.4x for Rosetta; 29.7x for Bridgepoint

DIFFERENCES
(1) Rosetta is a market segment leader with a differentiated product

(2) 95% of Rosetta’s sales are in the US, and growth plans are set for international expansion

(3) Rosetta’s gross margin is higher, 87% versus 71% for Bridgepoint

(4) Price-to-book value is more favorable for Rosetta: 2.7 versus 20.8 for Bridgepoint

(5) Online comparables to Bridgepoint suggest it is fairly priced (trailing 12 months) relative to Capella Education (CPLA) at 28x and Strayer Education (STRA) at 29x. The range is wide, however, with Apollo (APOL) at 15x ($10bb market cap) and Grand Canyon (LOPE) at 93x ($677mm market cap).

Notice that post-secondary online ed stocks sold off 15-17% since March 31, so there are some headwinds in the sector.

Rosetta Stone IPO: http://bit.ly/18evtp
Bridgepoint Ed IPO: http://bit.ly/4DhEsY
Disclosure: No positions