The IPO Buzz: Boxing with the Bear

 

It might be considered ambitious, given the stock market’s wild swings over the last two weeks –- up a hundred points here, down a couple of hundred points there. However, there’s a good possibility that most will make it to market. That’s what has been happening over the last couple of weeks. But it has developed into a two-tier IPO market. This week is no exception.

 

Among the deals in the limelight are a couple of Chinese companies, a South American eBay, another oil and gas limited partnership and who knows? -– maybe a surprise or two.  

 

E-House (China) Holdings (NYSE: EJ proposed) is a Shanghai-based real estate agency offering brokerage, consulting, and related services in about 30 cities in China.

 

The company believes it is the largest real estate services provider in China. It is growing rapidly. For the year ended Dec. 31, 2006, E-House reported net income of $18.1 million on revenues of $56 million, compared with net income of $11.1 million on revenues of $37.7 million for the same period a year ago. For the three months ended March 31, E-House reported net income of $4.4 million on revenues of $16 million, compared with a net loss of $1.3 million on revenues of $4 million for the same period a year earlier.

 

WuXi PharmaTech (NYSE: WX proposed) is a Shanghai-based pharmaceutical and biotech research and development outsourcing company. Its clients include the two big guns in the U.S. pharmaceutical industry: Pfizer (NYSE: PFE) and Merck (NYSE: MRK). (Both are Dow components.)

 

Its appeal is simple: Surging revenues and profits. For the year ended Dec. 31, 2006, WuXi reported net income of $8.9 million on revenues of $69.9 million, compared with net income of $6.1 million on revenues of $33.8 million for the same period a year ago. For the three months ended March 31, WuXi reported net income of $6 million on revenues of $33.8 million, compared with net income of $800,000 on revenues of $12.8 million for the same period a year earlier.

 

MercadoLibre (NGM: MELI proposed) is a Buenos Aires-based online trading service for over 18 million individuals and businesses in South America to buy and sell merchandise in more than 2,000 categories.

 

The buzz is that eBay (NDS: EBAY)owns about 20 percent of MercadoLibre and JPMorgan Partners another 18 percent. Oh, and one more thing: The company is experiencing rapid growth. For the year ended Dec. 31, 2006, MercadoLibre reported income from operations of $5.4 million on revenues of $52.1 million. Two years ago, for the year ended Dec. 31, 2004, MercadoLibre reported a loss from operations of $3.3 million on revenues of $12.7 million.

 

But these are just a few stories among the 13 companies waiting in the wings to make their debuts this week.

 

During the week of July 30, five of the seven planned offerings made it out the door. The previous week, bankers priced all eight deals on the calendar.

 

That’s pretty good, considering the stock market’s sharp swings between fast and furious slides and big late-day rallies over the past two weeks. However there has been a major difference between “the haves and have-nots” in the IPO market.

 

Of the 13 IPOs that have come to market since July 24, four were priced above their original filing ranges. Eight IPOs were priced below their original filing ranges and one was priced within range.

 

The average opening-day gain by the “in demand” four (priced above range) was 39.2 percent. Fast forward to Friday, Aug. 3, the average gain jumped to 49.2 percent.

 

 

 

The average opening-day gain by the “not in demand” eight (priced below range) was 4.05 percent. On Friday, Aug. 3, the average gain melted down to 1.21 percent.

 

 

 

Hint: Keep an eye on where an IPO gets priced.

 

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