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IPO Activity Is Up, But Examine Each Offering Carefully
In a year of other IPO gains by familiar names such as Hyatt Hotels (H) and Vitamin Shoppe (VSI), the average first-day IPO price "pop" has been 7 percent and the average overall return 10 percent. But don't get the impression we've returned to the wild-and-crazy IPO markets of the past.
New IPO Filings And What's On The Horizon
The New Year crawled in with the pricing of Renewable Energy below the filing range, and traded down from there. Things picked up with the other two deals in January, Guidewire Software (GWRE) and Verastem (VSTM), which were better deals. But the momentum has been picking up steadily, with 13 deals now in active marketing and 18 new IPO filings in January. So far it looks like the IPO market in 2012 will be a good one - and Facebook (FB) will add to the fun. Our updated pipeline has 120 deals filed and in preparation. At a macro level there's some evidence that the ecosystem for growing companies that can reach the IPO stage is getting better. The biggest one may be the new $1.5B fund raised by VC Andreessen Horowitz. Last year there was much talk of big VC funds dying off and leaving companies with enough capital
By IPO Candy:
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4 Reasons Facebook Might Flop
Consensus opinion believes that Facebook (FB) is poised to become the next Google (GOOG). If that happens, the Facebook IPO represents one of the best opportunities of the decade considering GOOG ramped from $100 a share to $200 in its first year and then went on to reach $700 a share in its fourth year. As one who believes we are in the midst of a tech revolution, I am naturally optimistic when it comes to most IPO's but this one is different. Facebook has some fatal flaws that make it a much more risky than Google. Consider the following four reasons why Facebook could be a flop: 1. Facebook is more mature than the market wants to believe. Facebook has more than 845 million active users. Of the 845 million, 483 million are categorized by Facebook as daily users. In any given day over half of the community checks
By Jason Schwarz:
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Facebook's Warning Signs
Investors are constantly told to read prospectuses and annual reports. Yet many do not. This is a shame because doing so can reveal important information. Consider the following details from a registration statement that was recently filed with the U.S. Securities and Exchange Commission:
By AAII:
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Facebook Bullishness Is Unwarranted
With the announcement of Facebook's (FB) IPO, analysts are valuing the company at an estimated market cap of $100 billion. Facebook has over 845 million monthly active users and is the most visited website on the internet. However, does this traffic warrant a valuation higher than blue chip companies such as Boeing (BA), Goldman Sachs (GS), Visa (V), and Disney (DIS)? The answer is a definitive no. In reality, Facebook's intrinsic value is closer to $41 billion (59% below consensus estimates). The bullishness behind Facebook is not warranted through its economic fundamentals. Based on generous growth projections of 30% earnings growth per year, its discounted cash flow based market cap should be $41 billion*. In order to hold its $100 billion valuation Facebook's earnings would have to grow at an average pace of 57% per year for five years. That kind of growth for Facebook is unsustainable. Facebook's strength is
By Nicholas Pardini:
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Facebook S-1 Filing Sheds Some Light On Its Data Center Strategy
As expected, Facebook (FB) filed this week its much awaited S-1 registration statement related to its proposed IPO. As a result, the Securities and Exchange Commission's EDGAR Web site, where regulatory documents can be accessed by investors, crashed and became almost unavailable, as reported by AllThingsD: The SEC got back to us and in response to the question of whether this [crash] was related to a Facebook surge, spokesman John Nester said, "Greatly increased traffic that began shortly before 5 pm slowed the public website. We are bringing on additional capacity to handle the load." Is Facebook better than the SEC at handling users volume spikes? At least, it is fully aware that an outage can harm its business (from the company's S-1 filing): Our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business.
By Paolo Gorgo:
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A Pipeline IPO On The Horizon
On Wednesday (February 1) Marathon Petroleum Corp. (MPC), the unit that was spun off from Marathon Oil Corp. (MRO), announced that it may itself spin off its pipeline and logistical assets sometime in the second half of 2012. The company, which consists of the downstream operations of Marathon Oil Corp., is under increasing pressure to increase shareholder value, namely by New York-based hedge fund Jana Partners LLC, who currently hold a 5.5% stake in MPC. Marathon Petroleum Corp. was spun off from the Marathon Oil Corp. last July, taking with it downstream operations. Marathon Oil Corp. maintained all upstream operations in the separation of the two entities. MPC currently operates six refineries in the United States along with roughly 9,600 miles of pipelines and logistical equipment. The company currently has the capacity to refine approximately 1.2 million barrels of crude oil per day. Additionally, it also has a distribution network
By Nima Baiati:
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Facebook Valuation Investigation
By David Urani
Congratulations to Facebook (FB), for bursting onto the scene with its IPO filing yesterday. We still don't know when it will make its market debut, but it's sure to be fairly soon. We don't know exactly what its market cap will be yet but the estimate puts it at between $75 billion and $100 billion. That puts Facebook among some very prestigious companies. The thing is, where Facebook's market cap differs from other companies in its valuation range is that Facebook's value anticipates some breakneck acceleration in sales and earnings. Granted, in the seven years it's been around its growth has been simply astounding but we thought we'd give you a rundown of where they are now and how they compare with some of the other companies in its $75-100 billion value range: You might have noticed off the bat the high profile of Facebook's peers. Note
By Wall Street Strategies:
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Running Like Hell From The Facebook IPO
So, I just went through the Facebook S-1 to take a look at what it said about the second most popular site on the internet. While I had figured that the company would fetch some lofty valuation, I thought "well, I shouldn't judge them before I actually look at the numbers..." After reading through the filing, I thought "Anybody that would value this company at $75-$100 BILLION dollars is either stupid or delusional to the point of historically needing to have been put on trial." Ok, so, that might seem a bit excessive. But, lets take a look at it before anyone says anything too rash. Let me be clear, I have no idea as to how to accurately predict the growth of the company hence, I am going to take it to the almost illogical extreme for this thought exercise. Presently, it seems that their ad revenue growth is
By Jeff Moore:
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Stay Away From Facebook IPO
By Tim Kiladze
Last night I grabbed a slice of pizza on the way home from work, and shortly after I sat down to eat, the two guys beside me started chatting me up. Once they found out that I’m a business reporter, they immediately turned the topic to Facebook’s initial public offering -- as if nothing else in the world mattered. I’m used to dealing with people asking me for stock advice, simply because of my job. It happens in cabs. On airplanes. At family parties. But I was shocked by how excited one of them got over the IPO. And he even had a business degree. I tried to be rational, explaining that while Facebook (FB) could very well grow to become the next Google (GOOG), it could also fall off a cliff like Myspace. I also noted that the valuation is practically impossible to peg because no
By Streetwise Blog:
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Social Media Stocks: All Hype, No Profit?
The Facebook (FB) IPO is coming! The Facebook IPO is coming! The Facebook IPO is coming! After relentless speculation and anticipation, the most popular social network site finally filed for its initial public offering (IPO) yesterday. Sadly, we’ll have to endure another couple months of “friending fever” before shares actually begin trading. (The anticipated IPO date is sometime in May.) While we wait, no doubt investor interest in other social media stocks is going to heat up. But please don’t let the hype push my warnings of a few weeks ago into the dark, deep, unreachable recesses of your mind. (WSD‘s Justin Fritz has some choice words on the subject, as well.) Almost without exception, social media IPOs have proven to be a sucker’s bet. To date, none of the hype has translated into any profits for everyday investors. And I don’t expect that track record to improve any time
By Lou Basenese:
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Facebook's Rate Of Acquisition Of New Accounts Says It All
Ok folks, it's not often that I issue a rank 'do not buy' statement on an S-1 (in fact, since starting the Ticker I can't recall ever doing it) but this is one where I feel I need to. It's Facebook. I'm basing this on one, and only one, criterion -- the rate of acquisition of new accounts is slowing. That's all I need to know and it should be all you need to know -- the company filed the S-1 as soon as they detected this slowdown in December. In addition, participation is narrowing; there were 1.74 users monthly per daily user in
By Karl Denninger:
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Guidewire Software: Insurance Industry Software
SUMMARY Guidewire Software (GWRE) priced above their filing range recently at $13 versus the $11 mid-point and has traded strongly in the aftermarket to $17. The company provides a software solution to P&C1 insurance companies for policy management, claims and billing. Revenues of $200M are growing at 20% with attractive gross and operating margins. License revenues are growing at a faster rate and effectively a large portion of their revenues are recurring. At the higher price the shares are close to our IV of $15. The company has an opportunity to expand into the "big data" segment of the business which could open up additional opportunities and boost valuation. POSITIVES, NEUTRALS AND NEGATIVES + Large opportunity - The P&C insurance industry is large and spends over $14B2 on software and services. Most of the existing technology is old, highly customized, inflexible and expensive to maintain. + Size & customer base
By IPO Candy:
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Verastem: Killing Cancer At The Root
SUMMARY Verastem (VSTM) priced at $10, the mid-point of the $9 to $11 filing range. Demand was solid though as the deal size was increased from 4.5 to 5.5 million shares. The company has a promising but deeply scientific and complicated story that includes improved treatments for cancer and personalized diagnostics. VSTM is a bet on some good science and IP targeting cancer stem cells and the management team and advisory board that will play out over a decade. Another name investors might wish to look into is Viral Genetics which is another early stage company with science and technology that disrupts cellular metabolism. MORE ON MANAGEMENT & SCIENCE As far as management goes it's an impressive team. The co-founder/CEO Christoph Westphal has chalked up several major successes including Alnylam (ALNY) $461M market cap), Momenta (MNTA) $775M market cap) and two others that were acquired by large drug companies [Glaxo
By IPO Candy:
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Facebook Ads Becoming More Valuable, Mobile May Be Next
By Anothony Ha
In the S-1 filing for Facebook’s IPO, the company offers a little more insight into its advertising business, which it describes as “the substantial majority” of its revenue (and that’s an understatement). In 2009, advertising accounted for 98 percent of Facebook’s revenue. The number declined to 95 percent in 2010 and 85 percent last year, thanks largely to the growth of revenue from payments. Advertising revenue is climbing, though that growth has slowed — it grew 69 percent in 2011, to $3.2 billion, but it grew 145 percent in 2010. (As one point of comparison, our corporate masters at AOL reported $1.3 billion in ad revenue last year.) What’s driving the growth? Facebook’s increasing traffic, which led to a 42 percent increase in ads served. Plus, the company says that the average price advertisers pay per ad increased by 18 percent, thanks to improved ad targeting capabilities
By TechCrunch:
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Analyzing Facebook's Risk Factors
By Josh Constine
Facebook’s $5 billion S-1 IPO filing includes a detailed assessment of business risks. These include: its lack of mobile monetization and the fact that it doesn’t own a mobile platform, government censorship and privacy scrutiny, inability to maintain its growth rate, and competition from Google+ as well as Twitter and Microsoft (MSFT). Here’s a closer look at these risks, followed by the full text of the risk summary, and you can see the whole Risk Factors section starting on page 10 of the S-1 filing to the SEC. Facebook (FB) explains its biggest challenge may be that: Our financial performance has been and will continue to be significantly determined by our success in adding, retaining, and engaging active users. We anticipate that our active user growth rate will decline over time as the size of our active user base increases, and as we achieve
By TechCrunch:
Growth and Engagement
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Zuckerberg Urges Understanding Before Investment
By Josh Constine
Facebook (FB) has just filed its S-1 to IPO. Below is the letter from founder and CEO Mark Zuckerberg about Facebook’s purpose, in which he explains “Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected. We think it’s important that everyone who invests in Facebook understands what this mission means to us.” Regarding business, Zuckerberg says “We think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services…As people share more, they have access to more opinions from the people they trust about the products and services they use. This makes it easier to discover the best products and improve the quality and efficiency of their lives.” Zuckerberg compares Facebook to transformative technologies like the printing press and
By TechCrunch:
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Status Update: Facebook Checks In At SEC For $5B IPO
Facebook, the company that encourages us to share more and more about ourselves, has finally opened its books for investors. The social media king registered with the SEC on Wednesday for a $5 billion US IPO, and the numbers are staggering. After just eight years, its monthly active user base has surpassed 800 million, and 2011 sales were $3.7 billion. Even after a string of large Internet IPOs from Renren (RENN), LinkedIn (LNKD), Groupon (GRPN) and Zynga (ZNGA), the Facebook offering stands far apart. As was rumored, Morgan Stanley took the coveted lead left spot on the IPO. Also chosen as lead underwriters were J.P. Morgan and Goldman Sachs, which invested $450 million early last year. The ticker was announced as FB, and market rumors have it listing on the
By Renaissance Capital IPO Research:
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IPO Preview: Platinum Energy Solutions
Based in Houston, Texas, Platinum Energy Solutions (FRAC) scheduled a $140 million IPO with a market capitalization of $296 million at a price range mid-point of $10 for Friday, February 3, 2012. FRAC is one of eight IPOs scheduled for this week (see our IPO calendar).
SUMMARY
FRAC is a start-up service business in an industry where demand decreased last week, see below. We believe FRAC's business model is seriously flawed because its customers demand short term contracts while FRAC needs to make long term purchases of equipment and machinery. Other problems include high customer concentration - two customers account for the bulk of the business and most importantly FRAC is targeting a market where demand lessened dramatically this week.
CURRENT IPO LESS THAN 50% OF PREVIOSLY FILED
Platinum Energy in September filed IPO plans to sell up to an estimated $300 million in stock to pay down debt and
By IPOdesktop:
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IPO Preview: Cempra Holdings
Based in Chapel Hill, North Carolina, Cempra Holdings (CEMP) scheduled a $72 million IPO with a market capitalization of $188 million at a price range mid-point of $12 for Thursday, February 2, 2012. CEMP is one of eight IPOs scheduled for this week (see our IPO calendar).
SUMMARY
CEMP is a clinical stage pharmaceutical company that wants to raise money for stage 2 and 3 clinical trials. CEMP doesn't seem to have a strong partner, is venture capital funded and recently borrowed more money from a technology venture capital fund. If CEMP clinical efforts are successful they still face considerable competition, see "competition" below.
CONCLUSION
Phase III clinical trials, for which part of the IPO proceeds are allocated, can take a long term. The outcome is hard to predict by definition. Therefore, it seems prudent in this investment climate to watch and wait for CEMP to make further progress.
INSIDERS
By IPOdesktop:
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Greenway Medical Technologies May Stand Out In a Busy Week For IPOs
Greenway Medical Technologies (GWAY) aims to modernize the doctor's appointment. The IT solutions provider for healthcare practices hopes to raise $80 million this week by offering 7 million shares at a price range of $11 to $13. Greenway plans to list on the New York Stock Exchange under the ticker symbol GWAY. J.P. Morgan, Morgan Stanley and William Blair are the lead underwriters on the deal, which is one of eight on the calendar this week.
Background
By moving patient histories and practice management from paper-based systems to computers, Greenway's software allows physicians to have a more comprehensive view of patient records. Adoption rates have been aided by the HITECH Act, which offers $19 billion in incentives to providers. The market opportunity is estimated at $35 billion. Greenway currently serves approximately 1,800 small practices with a 95% retention rate.
Financials
A deadline in the HITECH Act helped to boost revenue
By Renaissance Capital IPO Research:
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IPO Analysis from Seeking Alpha
'IPO Analysis' Tag RSS Syndication from SeekingAlpha.com
Caesars plans IPO to allow investors to sell
Casino operator makes fresh attempt to list publicly and aims to raise only $18m but move will allow unnamed co-investors the opportunity to exit their investment
Facebook serves notice on $5bn IPO
Facebook launched the process for its highly anticipated initial public offering, revealing details of its business for the first time
Facebook reveals what makes its network tick
The first close look that Facebook gave the world of its finances speaks volumes about what makes the social networking company tick
White House to ease IPO path
Fresh moves to boost small companies' access to capital even as regulators, Democratic lawmakers and investor advocates have opposed them
Canada's Sunshine Oilsands heads for HK IPO
The tar sands company, backed by Chinese state-owned enterprises, has shunned Toronto to launch its $600m IPO in Hong Kong
FT.com - IPOs
FT.com - IPOs