The IPO Buzz: On the Beach

First, let’s take a quick look at post-Labor Day trends:

And what’s the lesson? Bull markets are more fun.

 

During the stock market’s collapse, the IPO traffic dried up. In the post-Labor Day period, only two deals were priced. Once again, there’s something to be learned -– about pricing and fundamentals.

 

Grand Canyon Education (Nasdaq: LOPE) (quote, news, charts and related companies), a Phoenix-based provider of online post-secondary education services, offered 10.5 million shares at $12 each on Nov. 20, 2008. On Feb. 20, Grand Canyon closed at $18.81, UP 56.8 per cent from its initial offering price.

 

The deal was priced sharply below its original filing range. It was priced at $12 per share, on the low end of a revised range of $12 to $14 per share — down from a range initially set at $18 to $20 and then cut to $16 to $18.

Grand Canyon reported net revenues for the year ended Dec. 31, 2008, of $161.3 million, up from $99.3 million for the same period a year ago, and up from $72.1 million for the year ended Dec. 31, 2006.

 

Note: Thomson One Analytics reported Grand Canyon’s estimated median net revenues for the year ending Dec. 31, 2009, at $238.2 million.

 

Grand Canyon reported net income for the year ended Dec. 31, 2008, of $5.7 million or 17 cents per share (fully diluted), up from $1.2 million or 3 cents per share (fully diluted) for the same period a year ago, and up from $71,000 for the year ended Dec. 31, 2006.

 

Note: Thomson One Analytics reported Grand Canyon’s estimated median earnings per share of 48 cents per share for 2009 and 80 cents per share for 2010.

 

Thomson One Analytics also reported Grand Canyon’s median estimated long-term growth of 35 percent versus 14.4 percent for its industrial sector (Consumer Services).

 

And Thomson One Analytics’ recommendation: “Buy” to “Strong Buy” with a median price target of $24 per share.

 

Mead Johnson Nutrition (NYSE: MJN) (quote, news, charts and related companies), an Evansville, Indiana-based supplier of pediatric nutrition products, priced 30 million shares at $24 each on Feb. 11, 2009. On Feb. 20, Mead Johnson closed at $29.63, UP 23.5 per cent from its initial offering price.

 

The Mead Johnson deal was priced on the high end of its $21- to $24-per-share filing range. Worth noting: The number of shares was increased to 30 million, UP from 25 million shares. Later, the “greenshoe” or over-allotment was exercised at 4.5 million shares to make the final offering sized at 34.5 million shares.

 

What the tape tells us is that the bankers had a strong book up to $24 per share, but pushing the price higher would cause institutions to drop out. Therefore, they kept the price at $24 and increased the number of shares by 38 percent, including the “greenshoe.”

 

Mead Johnson reported net revenues for the year ended Dec. 31, 2007, of $2,567.4 million, up from $2,345.1 million for the same period a year ago.

 

Mead Johnson reported net income for the year ended Dec. 31, 2007, of $422.5 million, up from $398.2 million for the same period a year ago.

 

Mead Johnson reported net income for the nine months ended Sept. 30, 2008, of $347.5 million, up from $320 million for the same period a year ago.

 

The company has not reported 2008 results. And because the IPO is still in its quiet period, the underwriters have not issued research reports.

 

 

Here’s something that floated across the news tape in Friday’s market. It may be an IPO to put on your watch list.

 

LogMeIn (Nasdaq: LOGM proposed), a Woburn, Massachusetts-based provider of on-demand, remote-connectivity solutions to small and medium-sized businesses, filed an amendment to its pending IPO.

 

No pricing terms were announced, but fundamentals were.

 

LogMeIn reported net revenues for the year ended Dec. 31, 2008, of $51.7 million, up from $27 million for the same period a year ago.

 

LogMeIn reported a net loss for the year ended Dec. 31, 2008, of $5.4 million, down from a net loss of $9.1 million for the same period a year ago.

 

LogMeIn reported net revenues for the three months ended Dec. 31, 2008, of $16 million, up from $8.6 million for the same period a year ago.

 

Now here’s the kicker.

 

LogMeIn reported net income for the three months ended Sept. 30, 2008, of $1.2 million, up from a net loss of $2.6 million for the same period a year ago.

 

That was the first time in the company’s six-year history that it reported a quarterly profit. LogMeIn was formed in February 2003.

 

There could be a reason for the dramatic surge in the company’s fundamentals.

 

In December 2007, LogMeIn entered into a service and marketing agreement with Intel (Nasdaq: INTC) (quote, news, charts and related companies) to jointly develop a service that delivers connectivity to computers built with Intel components.

 

Now send in the IPO.