The IPO Buzz: Springtime for IPOs

 

For the week of Dec. 7, 2009, the IPO calendar listed eight deals (four made it to market); the previous larger weekly calendar reaches back two years to the week of Dec. 10, 2007, when the calendar listed 15 deals (11 made it to market).

 

This week’s calendar must be considered encouraging for coming events. Now, let’s take a look of what we can expect.

 

The two carryovers are CorMedix (NASDAQ: CRMD.U – proposed), a Summit, N.J. based start-up pharmaceutical company, and Redgate Media Group (NASDAQ: RGM – note: a three-letter NASDAQ symbol), a Beijing-based diversified media company. Redgate is one of the two Chinese deals on tap for this week.

 

China Lodging Group, Limited (NASDAQ: HTHT – proposed) is a Shanghai-based operator of 173 leased-and-operated economy hotels and 63 franchised-and-managed economy hotels in China.

 

The company was formed in 2007. Since then, China Lodging turned the corner to profitability during the three months ending June 30, 2009. It reported a profit of RMB29.7 million (US$4.3 million), UP from a loss of RMB27.2 million (US$4 million) for the previous three months ending March 30.

 

Let’s take a look at past Chinese economy hotel chains that have gone public in the U.S. capital markets. They were 7Days Group Holdings (NYSE: SVN) and Home Inns & Hotels Management (NASDAQ: HMIN).

 

Since making their public debuts, their aftermarket performances have been mixed: One up, one down.

 

7Days Group priced its IPO of 10.1 million shares at $11 each on Dec. 19, 2009. Its stock closed on Friday, March 19, at $10.25, DOWN 6.8 percent from its initial offering price.

 

Home Inns priced its IPO of 7.9 million shares at $13.80 each on Oct. 25, 2006. Its stock closed on Friday, March 19, at $32.33, UP 134.3 percent from its initial offering price.

 

Google’s Hotels and Motels Index has also turned in a mixed performance. For the 52-week period ending March 19, the Hotel Index was UP 32.8 percent. For perspective, the Nasdaq Composite Index was UP 65.8 percent for the same period. And for 2010 so far, the Hotel Index is UP 11.7 percent, and the Nasdaq is UP 4.64 percent.

 

China Lodging expects to price 9 million American Depositary Shares at $10.25 to $12.25 each on Thursday evening to trade Friday morning.

 

There are two technology IPOs on this week’s calendar. They are Calix Networks (NYSE: CALX – proposed – Note: a four-letter NYSE symbol) and MaxLinear (NYSE: MXL – proposed).

 

Calix Networks is a Petaluma, California-based provider of communications access systems and software, which enables communications service providers to connect to their residential and business subscribers.

 

Since it was founded in 1999, Calix increased its revenues to $232.8 million for the year ending Dec. 31, 2009, UP from $133.5 million for the year ending 2005.

 

Net income is another matter.

 

For the year ending 2009, Calix reported a loss of $22.4 million and an accumulated deficit of $392.2 million. That’s the bad news. The good news can be found in the company’s quarter-to-quarter comparisons.

 

The company turned profitable during the three months ending Dec. 31, 2009. Calix reported net income of $2.1 million on revenues of $88.7 million, compared with a net loss of $288,000 on revenues of $70.7 million for the same period a year ago.

 

Google’s Communications Equipment Index has been a laggard. For the most recent 52-week period ending with Friday’s close on March 19, the Communications Index was UP 32.8 percent (Remember: The Nasdaq Composite Index was UP 65.8 percent for the same period.)

 

For the year to date, the Communications Index is DOWN 1.2 percent; in contrast, the Nasdaq is UP 4.64 percent).

 

Calix Networks expects to price about 6.3 million shares at $11 to $13 each on Tuesday evening to trade Wednesday. The company plans to offer about 4.2 million shares and selling shareholders plan to about 2.2 million shares.

 

MaxLinear is a Carlsbad, California-based provider of highly integrated, RF analog and mixed-signal semiconductor solutions for broadband communications applications.

 

For the year ended Dec. 31, 2009, MaxLinear reported net income before taxes of $4.6 million, UP from a loss of $1.9 million for the same period a year ago, and revenues of $51.4 million, UP from $31.3 million a year ago.

 

That’s good, but there’s the proverbial but.

 

MaxLinear reported a decline in revenues and income before taxes for the three months ending Dec. 31 from the three months ending Sept. 30.

 

For its December quarter, MaxLinear reported income before taxes of $1.9 million, DOWN from $2.4 million for its September quarter, and revenues of $15.2 million for its December quarter, DOWN from $16.2 million its September quarter.

 

Google’s Semiconductor Index has also been a laggard. The Index was up 46 percent for the past 52 weeks (when the Nasdaq was UP 65.8 percent).

 

But Google’s Semiconductor Index is down 0.5 percent for the year to date, while the Nasdaq is UP 4.64 percent.

 

MaxLinear expects to price about 5.43 million shares at $11 to $13 each on Wednesday evening to trade on Thursday. The company plans to offer about 4.2 million shares and selling shareholders plan to about 1.3 million shares.

 

Come what may, 2010 has seen 21 IPOs come to market. This year is off to a much better start than 2009, as far as the IPO market is concerned. During 2009’s first quarter, bankers priced a grand total of two IPOs. That’s right – two. You could count them on one hand and have three fingers left over.