The IPO Buzz: IPO Shock, Awe and Never Mind

The Ugly
The King Digital Entertainment plc) (KING) IPO came to market with the fanfare of an Olympic opening-day ceremony. The hype surrounding the offering reached out from the TV set as everyone on camera was talking up the deal.
The interactive entertainment company with its Candy Crush Saga game had priced its IPO the night before at $22.50 per share.
The unexpected happened.
Word swept across the floor of the New York Stock Exchange – the King IPO was looking to open between $20 and $21 per share. It opened at $20.50, DOWN $2 per share. It was hard to conceal the shocked disbelief on the TV personalities’ faces.
The question that was on everybody’s mind was: “What happened?” There had been talk of valuation problems. One example could be found on page 48 of its prospectus. It stated: For the quarter ended Dec. 31, 2013, King reported net income of $159.3 million on revenues of $601.7 million, DOWN from net income of $229.8 million on revenues of $621.2 million for the quarter ended Sept. 30, 2013.
The final answer: Buyers did not show up in the aftermarket.
The Good
The good came from an unexpected industrial group – a REIT, or real estate investment trust. Over the last five years – 2009 through 2013 – 53 REITS were priced, according to the U.S. Securities and Exchange Commission filings. There is usually no barroom bragging about opening-day moonshots from this group.
Consider this: Of the 53 REITs priced over the last five years, 17 closed their opening day as winners, 29 as losers, seven were unchanged, and the average loss for all 53 was 1.18 percent.
Last week was different.
CBS Outdoor Americas (CBSO) priced its IPO at $28. It started trading at $30.10, UP 7.5 percent from its IPO price.
The Bad
Friday was not a happy day around the IPO water fountain. Two cloud-computer companies and a Website provider had disappointing opening-day performances: 2U, Inc. (TWOU) priced its IPO at $13, opened unchanged at $13 and closed at $13.98; Aerohive Networks (HIVE) priced its IPO at $10, opened down $1.05 at $8.95 and closed at $10; and Everyday Health (EVDY) priced its IPO at $14, opened up 50 cents per share at $14.50 and closed at $13.50, DOWN 50 cents per share.
Nine IPOs in the Wings
This sets the stage for this week, when nine IPOs are looking to raise almost $2 billion,
In the mix are three cloud-computer companies, two healthcare providers, two technology companies, a Chinese provider of professional education and a carryover from last week. Until Friday’s stumbling aftermarket performances, there had been high hopes for most. Now caution rules the waves.
Trio in the Clouds
Five9 (FIVN – proposed) is a San Ramon, California-based provider of cloud software for customer contact centers. (For more information, please click here: Five9)
Opower (OPWR – proposed) is an Arlington, Virginia-based provider of cloud-based software to the $2.2 trillion utility industry. (For more information, please click here: Opower)
Rubicon Project (RUBI – proposed) automates the buying and selling of advertising through its Advertising Automation Cloud platform. The company is headquartered in Los Angeles. (For more information, please click here: Rubicon Project)
A Pair in Healthcare
Corium International (CORI – proposed) is a Menlo Park, California-based commercial stage biopharmaceutical company developing specialty pharmaceutical products for transdermal and transmucosal delivery systems. (For more information, please click here: Corium International)
SCYNEXIS (SCYX– proposed) is a Durham, North Carolina-based pharmaceutical company developing novel anti-infectives to address significant unmet therapeutic needs. Its lead product candidate is a novel oral and intravenous drug to treat serious and life-threatening invasive fungal infections in people. (For more information, please click here: SCYNEXIS)
Two in Technology
GrubHub (GRUB– proposed) is a Chicago-based operator of an online and mobile platform for restaurant pick-up and delivery orders. (For more information, please click here: Grubhub)
IMS Health Holdings (IMS – proposed) is a Danbury, Connecticut–based provider of information and technology services to the healthcare industry that let its clients measure and improve their performance. (For more information, please click here: IMS Health Holdings)
Getting Smart in China
Tarena International (TEDU – proposed) is a Beijing-based provider of professional education services in China. (For more information, please click here: Tarena International)
Is Eight Enough?
Looking into next week, the calendar has eight IPOs aiming to raise $3.9 billion. A couple of brand-name companies expect to make their debuts – Ally Financial (ALLY – proposed) and La Quinta Holdings (LQ – proposed); more about them later.
Stay tuned.
Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.