The IPO Buzz: Bookmark These IPOs

On Monday, Feb. 23, 2009, Education Management (Nasdaq: EDMC proposed) and Rosetta Stone (NYSE: RST proposed) reported results for the period ended Dec. 31. Both companies have pending IPOs. Both reported strong financials and both are from the education sector.  
Let’s take a closer look.
Welcome to the Open Classroom
Education Management is a Pittsburgh-based provider of post-secondary education in North America. As of October 2008, the Pennsylvania company was offering academic programs to over 110,000 students through campus-based and online instruction.
For the quarter ended Dec. 31, 2008, Education Management reported net income of $34 million, UP 31.3 percent from $25.9 million for the same period a year ago, and net revenue of $445.3 million, UP 24.1 percent from $358.8 million for the same period a year ago.
Rosetta Stone is an Arlington, Virginia-based provider of technology-based language learning solutions. The company offers lessons through software, online services and audio practice tools primarily under its Rosetta Stone brand in 31 languages to individuals, educational institutions, armed forces, government agencies and corporations.
For the quarter ended Dec. 31, 2008, Rosetta reported net income of $4.94 million, UP 118.6 percent from $2.26 million for the same period a year ago, and revenue of $66.3 million, UP 54.2 percent from $43 million for the same period a year ago.
Neither company announced proposed pricing terms — yet.
But that’s not all, folks!
How’s Your Mandarin?
Since October 2007, bankers have priced seven IPOs from the education industry — four from China and three from the United States, according to Securities and Exchange Commission filings.
The Chinese deals have been pounded. Consider the following:
On the other hand, the Dow Jones Shanghai Index (quote) has been hammered as well. The Index closed Friday, Feb. 27, 2009, at 234.52, DOWN 58.4 percent from 563.15, its close on Oct. 18, 2007, the pricing date of Noah, the first IPO from the education industry.
In the American Idiom
However, there are happy faces in the United States. Two of the three U.S.-based education IPOs have done very well and the other, although underwater, was outperforming the industry. Here’s the roll call:
Even though shows the School Index (education industry) (chart) DOWN 13.8 percent from Oct. 19, 2007, through Feb. 27, 2009, the S&P 500 Index (chart) was DOWN a whopping 52.9 percent for the same period.
Now this brings us back to the beginning of this story. You might want to bookmark the education deals in the IPO pipeline.