This week’s calendar has a tiny offering from New Jersey (CorMedix – NYSE Amex: CRMD.U – proposed looking to raise $12 million); a small offering out of China (Redgate Media Group – NASDAQ: RGM – proposed – a three-letter NASDAQ symbol – looking to raise $43 million) and a $100 million offering from California (Financial Engines (Nasdaq: FNGN – proposed looking to raise $106 million) and will be the focal point of the week.
Financial Engines was formed in 1996 as an independent portfolio management company providing management services, investment advice and retirement help to participants in employer-sponsored defined contribution retirement plans.
The company reported record annual revenues of $85 million for the year ended Dec. 31, 2009; record net income of $4.6 million; record assets under management of $25.7 billion and record total members of 391,200. But it has been rough going over the years. Financial Engines also reported an accumulated deficit of $157.4 million.
Financial Engines competes in the highly competitive Investment Services Industry and against larger companies, such as Morningstar (NASDAQ: MORN) and T. Rowe Price Group (NASDAQ: TROW). The good news is the wind has been at the backs of the industry and its individual companies.
The Investment Services Industry Index was UP 58.6 percent over the last 52 weeks at Friday’s close. Morningstar was UP 54.5 percent and T. Rowe Price was UP 101.6 percent.
Financial Engines expects to price 10.6 million shares at $9 to $11 each Monday evening, March 15, to trade Tuesday morning, March 16. The company will offer about 5.9 million shares and selling shareholders will offer about 4.7 million shares.
And now the moment of truth concerning Financial Engines’ proposed pricing at the mid-point of its range of $10 per share. Consider the following:
- Financial Engines expects to be priced at about $10 per share or 21.7 times earnings its 2009 earnings of 46 cents per share.
- That’s at a discount of 27.2 percent from Morningstar. On Friday, Morningstar closed at $32.64 per share or 29.8 times its 2009 earnings of $1.66 per share.
- And that’s at a discount of 33 percent from T. Rowe Price. On Friday, T. Rowe Price closed at $53.33 per share or 32.4 times its 2009 earnings of $1.69 per share.
To get an IPO out the door and trade at a premium, you’ll have to discount the offering from its publicly traded competitors. After all, an IPO pricing is a single-day event. When department stores have a single-day sale, they discount the merchandise. Sometimes bankers do so as well.
Bankers priced four deals last week. They raised $1.1 billion for the companies going public, collected $72.6 million in underwriting fees and commissions for themselves, and their customers went home empty handed. That’s Wall Street for you.
The single opening-day winner was Sensata Technologies (NTSE: ST) and its gain of 50 cents per share, which offset the accumulated losses of the other three. AVEO Pharmaceuticals (NASDAQ: AVEO) lost a penny per share; Baltic Trading Limited (NYSE: BALT) lost 4 cents a share, and Crude Carriers (NYSE: CRU), lost 45 cents a share.
CBOE Holdings was one of four companies filing to go public last week. Already in the IPO pipeline were GameFly; Green Dot and Tesla Motors, which are reportedly shaping up as “hot issues.” Investment professionals were projecting opening-day gains ranging from $1 to $2 to $5 a share — or 3-Star to 4-Star SCOOP ratings.
Don’t go away. Things could get interesting.
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 and opinions.