The IPO Buzz: IPO Sleepers

The 2010 IPO Scorecard showed 10 of the year’s 14 deals were in the winners’ circle, one was unchanged, and three were losers.
The average gain for all 14 IPOs was 4.13 percent. That’s 63.9 percent better than the Nasdaq Composite Index. For the year to date, the Nasdaq was up 2.52 percent. The Nasdaq closed on Friday, March 5, at 2,326.53 – UP 2.52 percent from its close at 2,269.13 on Dec. 31, 2009.
True, all but one of this year’s offerings were cut in size to get them priced. And this week might be the same.
Four IPOs plan on sailing into New York City’s harbor. Two compete in the shipping industry, one’s a pharmaceutical and the other is technology company owned by a private equity firm. The IPO handicappers don’t expect any opening-day moonshots from the group. They have their reasons.
The Shipping IPOs
Baltic Trading Limited (NYSE: BALT – proposed – Note a four- letter NYSE symbol) and Crude Carriers Corp. (NYSE: CRU – proposed) are newly formed bulk shippers.
Baltic Trading plans to conduct a shipping business focused on the dry-bulk industry spot market. It plans to price 16.3 million shares of common stock at $14 to $16 each on Tuesday evening, March 9, to trade on Wednesday, March 10, 2010.
Crude Carriers plans to conduct a shipping business focused on the crude tanker industry. It plans to price 13.5 million shares of common stock at $14 to $16 each on Thursday evening, March 11, to trade on Friday, March 12, 2010.
Shipping Industry Snapshot
Google Finance’s Water Transportation Index was UP 38.3 percent for the 52-week period ending March 5, 2010. Not too bad, but it’s worth noting that the Nasdaq Composite was UP 68.8 percent over the same period of time.
The IPO Buzz: Analysts reportedly like the companies -– traders don’t like the deals.
The Pharmaceutical IPO
AVEO Pharmaceuticals (NASDAQ: AVEO – proposed) is focusing on discovering, developing and commercializing novel cancer therapeutics. It plans to price 7 million shares at $13 to $15 each on Wednesday evening, March 10, to trade on Thursday, March 11.
The company does have revenues — $20.7 million for the year ending Dec. 31, 2009 — up from $19.7 million for the same period a year ago. But it has posted an accumulated deficit of $177.7 million.
Pharmaceutical Industry Snapshot
Google Finance’s Biotechnology and Drugs Index was UP 16.6 percent for the 52-week period ending March 5. For perspective, the Nasdaq was up 68.8 percent.
The IPO Buzz: The last three pharmaceutical companies that made their debuts had to be cut in size to get them out the door, and they have turned in mixed results in the aftermarket. At Friday’s close, one was up, one was down, and the other was unchanged. The average gain was just 0.33 percent.
(They were: Anthera Pharmaceuticals (NASDAQ: ANTH), unchanged from its offering price on March 1, 2010; Ironwood Pharmaceuticals (NASDAQ: IRWD), up 16.8 percent from its offering price on Feb. 1; and China Nuokang Bio-Pharmaceutical (NASDAQNKBP), down 20.3 percent from its offering price on Dec. 9, 2009.)
The Technology IPO
Sensata Technologies Holding N.V. (NYSE: ST – proposed) produces sensors and controls for mission-critical applications, such as thermal circuit breakers in aircraft, pressure sensors in automotive systems, and bimetal current and temperature control devices in electric motors. It plans to price 31.6 million shares at $18 to $20 each on Wednesday evening, March 10, to trade Thursday, March 11.
Sensata reported revenues of $1.13 billion for the year ending Dec. 31, 2009, DOWN from $1.42 billion a year earlier. It reported a loss of $26.7 million for the year ending 2009, down from a loss of $134.5 million in 2008.
The company reported an accumulated deficit of $627.7 million and an outstanding debt of $2.3 billion.
This is the case of another IPO from a private equity firm –- another instance of trying to take a company public with huge debt; the proceeds from the offering paying down debt; paying insiders’ “fees associated with an advisory agreement” and for insiders to sell stock in the offering.
Note: Sensata plans to sell 26.3 million shares of the 31.6 million shares being offered. Sensata expects to receive about $458.3 million from the proceeds. Of that amount, $350 million is earmarked to repay debt; $24.1 million would be used to pay advisory fees, and the balance, or about $84.1 million, would go for general corporate proposes.
Selling shareholders include Sensata Investment Company S.C.A., which plans to sell 4.9 million shares; it is owned by Bain Capital Funds, a major private equity player.
Note: Bain Capital was founded in 1984 by Bain & Company partners Mitt Romney (yes, that Mitt Romney, the former governor of Massachusetts and a Republican presidential hopeful for 2012), T. Coleman Andrews III and Eric Kriss.
Technology Industry Snapshot
Google Finance’s Technology Index was UP 70.3 percent for the 52-week period ending March 5, and the Nasdaq was up 68.8 percent for the same period.
The IPO Buzz: No opening-day moonshot.
A Bright Outlook
But don’t go away, folks. Consider this:
  • Six companies filed to go public last week, bringing the year’s total to 36. In comparison, it took until Aug. 21, 2009, for 37 companies to file plans to go public.
  • The stock market is on a roll. All the major indexes closed on Friday, March 5, at or near their closing highs for the year, and sharply above their 2010 lows set a month ago. The Dow Jones Industrial Average was UP 6.6 percent from its Feb. 8 closing low of 9,908.39; the S&P 500 was UP 7.1 percent from its Feb. 10 closing low of 1,1063.11, and the Nasdaq was UP 12.9 percent from its Feb. 10 closing low of 2,059.94.
  • The IPO market’s aftermarket performance is much better than people think.
The IPO Buzz: The facts show a building pipeline, a stock market recovery and the IPO aftermarket outpacing the underlying stock market.
Let this trend continue and it won’t be long before you’ll start seeing some interesting names pop up on the IPO calendar.
Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.