The IPO Buzz: IPO Haves and Have-Nots

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Facebook (FB- proposed) filed for an IPO of $5 billion last Wednesday. To call this one a “have” is a major understatement. The Facebook filing answered some questions, such as the IPO’s size – over a billion dollars – plus everybody got a look at the company’s financials and the company disclosed that Mark Zuckerberg owns over 538 million shares of Class B common stock representing 28.2 percent voting power before the offering.
 
What was not determined was the number of shares that will be offered and at what price. Without this information, the market capitalization of Facebook remains to be determined.
 
Caesars Entertainment (CZR – proposed) announced proposed pricing terms and named seven managers for its $16.3 million offering last Thursday – yes, $16.3 million. The company plans to sell 1.8 million shares at $8 to $10 each. The deal jumped onto the calendar to be priced Monday evening, Feb. 6, to trade on Tuesday.
 
Note: This is not a small-cap company. Caesars expects to have 125 million shares outstanding after the offering, which makes its market capitalization over $1.1 billion.
 
The reason for such a tiny offering is to establish a market for its stock for future financing by the company. After all, Caesars reported debt of about $19.6 billion and interest expenses of about $1.5 billion, according to its prospectus.
 
The last time Caesars tried to go public was in November 2010. It planned to offer 31.3 million shares at $15 to $17 each, but withdrew the offering on Nov. 15, 2010. The reason reportedly was investor concerns about its debt.
 
It’s hard to imagine anyone or anything with “Caesar” as part of its name as being a “have not” – not by a long shot. But the company, at the moment, appears to be in that category, based on its filing for such a small IPO to test the waters.
 
A Pair to Watch
This brings us to this week. Nine deals are on the calendar. They are expecting to raise about $745 million. None are expected to produce an opening-day moonshot, according to IPO experts. Nevertheless, the experts are reportedly looking at a couple of potential “haves”:
 
EPAM System plans to price 7.4 million shares at $16 to $18 each on Tuesday evening. The IPO is expected to start trading Wednesday morning on the NASDAQ Global Market under the proposed symbol “EPAM.”
 
The company is a global IT services provider of software product development services, software engineering and vertically-oriented custom development solutions to independent software vendors and technology companies. Based in Newtown, Pennsylvania, EPAM was formed in 1993. It has about 6,168 employees.
 
For the three months ending Sept. 30, 2011, EPAM reported net income of $14.6 million on revenues of $86.4 million, compared with net income of $6.1 million on revenues of $59.1 million for the same period a year ago.
 
EPAM plans to offer 1.5 million shares and selling shareholders plan to offer 5.9 million shares. The company expects to have about 40.7 million shares outstanding after the offering.
 
Roundy’s Parent Company plans to price 18.2 million shares at $10 to $12 each on Tuesday evening. The IPO is expected to start trading Wednesday morning on the New York Stock Exchange under the proposed symbol “RNDY.”
 
The company is a Midwest supermarket chain. It believes it is the largest grocery retailer in the state of Wisconsin. As of Nov. 1, 2011, the company operated 158 grocery stores in Wisconsin, Minnesota and Illinois under the names of Pick’n Save, Rainbow, Copps, Metro Market and Mariano’s. Roundy’s was formed in 1872. It has about 17,761 employees.
 
For the 13 weeks ending Oct. 1, 2011, Roundy’s reported net income of $12.4 million on revenues of $976.9 million, compared with net income of $9.5 million on revenues of $939 million for the same period a year ago.
 
Roundy’s plans to offer 11.3 million shares and selling shareholders plan to offer 6.9 million shares. The company expects to have about 41.5 million shares outstanding after the offering.
 
The rest of this week’s IPO calendar is not stirring that much excitement, according to the IPO professionals. In other words, they appear to be potential “have nots.”
 
But remember: This is Wall Street, where anything can happen – and it often does.
 
There were no IPOs on tap for next week at press time. Not to worry. Several companies in the pipeline have started reporting their 2011 year-end results. You can start looking for more of them to move onto the calendar.
 
Stay tuned.
 
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions. 

The IPO Buzz: IPO Haves and Have Nots

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Worth noting: April’s IPOs raised about $2 billion, while bankers pocketed about $140 million in underwriting commissions and fees.
 
What about the customers?
 
You won’t see any of their yachts anchored in New York City’s harbor.
 
Yes, it’s a strange case of the IPO market’s “haves and have nots.”
 
As any retailer will tell you: To have a successful one-day sale you must discount the merchandise. Wall Street’s IPO offerings are nothing more than a one-day sale. To make it successful, the offering price must be discounted from its publicly traded competitors. The facts speak for themselves — it’s not happening in today’s market.
 
Consider the following numbers, based upon the U.S. Securities and Exchange Commission’s filings:
  • From January 2001 through December 2009, bankers priced about 1,200 IPOs (excluding unit offerings). They had an average opening-day gain of 12.9 percent.
  • In 2009, bankers priced 61 IPOs. They had an average opening-day gain of 8.82 percent.
  • In 2010, bankers have priced 40 IPOs. They have an average opening-day gain of 4.15 percent.
Conclusion: As everybody knows, today’s offerings will have to be given a larger discount than 4 percent.
 
How the Fortune Cookie Crumbles
That thought brings us to this week. Eight IPOs are on the calendar. Two are Chinese. People are skeptical of Chinese IPOs, and with reason.
 
Over the last 12 months, U.S. bankers have priced 10 IPOs from China (excluding three small-cap deals, each with less than $95 million in market value at the time of pricing). For the rest, it’s been like “Nightmare on Elm Street.”  At Friday’s close, only two were in the winner’s circle. Eight were losers; the 10 Chinese deals have an average aftermarket performance of minus 5.39 percent.
 
The two Chinese deals on this week’s calendar are Charm Communications (CHRM – proposed), a Beijing-based domestic television advertising agency, and MIE Holdings (MIE – proposed), a Beijing-based upstream oil company operating in three oilfields in China’s Songliao Basin.
 
For perspective on Charm Communications, it’s important to remember that three Chinese advertising firms have gone public in the U.S. capital markets. They are AirMedia Group (AMCN), Focus Media Holding (FMCN) and VisionChina Media (VISN). Of these three, Focus Media is only profitable one. Charm Communications reported earnings of 7 cents per share over the last 12 months. This isn’t a sector that is attaching much interest, according to the investment professionals.
 
On April 30, 2010, Google Finance’s Advertising Industry index was up 25.2 percent for the 52-week period ending April 30. In contrast, the Nasdaq Composite Index was up 43.2 percent over the last 52 weeks.
 
Charm Communications is expecting to price 7.1 million American Depositary Shares (ADS) at $9 to $11 each on Tuesday evening and to trade on Wednesday.
 
MIE Holdings will be the first Chinese oil and gas company to go public in the U.S. capital markets since February 2001 when CNOOC (CEO) priced 81.2 million shares at $15.40 each to raise $1.25 billion. Over the years, CNOOC has done well. The stock climbed to a closing high of $216.49 on Oct. 31, 2007. On Friday, April 30, 2010, it closed at $175.92.
 
Google Finance’s Oil and Gas Operations index was up 40.4 percent for the 52-week period ending April 30 and slightly underperformed the Nasdaq Composite Index over that time.
 
MIE Holdings is expecting to price 18 million ADS at $11.50 to $13.50 each on Thursday evening and to trade on Friday.
 
This week’s IPO market looks much like the recent past, according to the pros: Companies raising hundreds of millions of dollars, with bankers pocketing tens of millions in fees.
 
And the customers?
 
Don’t expect to see any of their yachts anchored in New York City’s harbor.
 
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.