The IPO Buzz: June’s Photo Finish

First, the bad news: This year’s first half of 14 IPOs will be the slowest since 2003 when 10 were priced, according to the U.S. Securities and Exchange Commission’s filings. 
 
 The second half of 2003, the traffic picked up. Bankers priced seven IPOs in July 2003 and another 67 by year’s end. The pick-up in 2003 was built on the foundation of a strong U.S. stock market.
 
Drawing on Strength
On June 19, 2003 — six years ago Friday — the Nasdaq Composite Index closed at 1,648.64, UP 35.4 percent from 1,217.47 on March 9, 2003, its closing low for that year.
 
 The IPO momentum continued into 2004 when 248 deals were priced.
 
Now the good news: June 2009 will have seen six of the year’s 14 IPOs priced, and four in its final week. The pick-up in June’s IPO traffic was built on the foundation of a strong U.S. stock market. On Friday, June 19, 2009, the Nasdaq Composite closed at 1,827.47, UP 44.1 percent from 1,217.47 on March 11, its closing low for 2009.
 
The Week Ahead
 
Now let’s take a look at this week, which starts on Monday, June 22nd. At press time, there were no overwhelming “must have” favorites among this week’s offerings. However, that doesn’t mean the calendar should be avoided. There are two Chinese deals, a REIT and a medical software provider. Here’s the rundown:
 
Chemspec International (NYSE: CPC – proposed) plans to price 8.1 million American Depositary Shares (ADS) at $7 to $9 each to raise about $64.8 million. The Shanghai-based company will offer 6.3 million ADS and selling shareholders will offer 1.8 ADS million shares. The IPO is expected to start trading on Wednesday, June 24. 
 
Chemspec believes it is the largest manufacturer of fluorinated specialty chemicals in China based on sales, with a share of about 21 percent and 25 percent of the Chinese market in 2007 and 2008, respectively. Here are some noteworthy financials:
  • For the three months ending March 30, 2009, Chemspec reported net income of RMB36.3 million (or US$5.3 million), DOWN from RMB58.7 million (or US$8.5 million) for the same period a year ago. 
  • For the three months ending March 30, Chemspec reported sales of RMB200.9 million (or US$29.1 million), UP from RMB163.2 million (or US$23.6 million) for the same period a year ago. 
  • Underwriters: Credit Suisse and Citi are the joint-lead managers. Acting as co-managers are Oppenheimer and Piper Jaffray.
Duoyuan Global Water (NYSE: DGW – proposed) plans to price 5 million shares at $13 to $15 each to raise about $70 million. The IPO is expected to start trading on Wednesday, June 24. 
 
Based in Beijing, Duoyuan Global believes it is one of China’s largest nationwide distributors of water treatment equipment suppliers. The company distributes more than 80 complementary products to over 80 distributors throughout China in 28 provinces. Here are some noteworthy financials:
  • For the three months ending March 30, 2009, Duoyuan reported net income of RM28.9 million (or US$4.2 million), UP from RMB15.0 million (or US$2.2 million) for the same period a year ago. 
  • For the three months ending March 30, Duoyuan reported revenues of RMB120.6 million (or US$17.7 million), UP from RMB86.8 million (or US$12.6 million) for the same period a year ago.
  • Underwriters: Piper Jaffray is the lead manager. Acting as co-managers are Oppenheimer and Janney Montgomery Scott.
Invesco Mortgage Capital (NYSE: IVR – proposed) plans to price 20 million shares at $20 each to raise about $400 million. The IPO is expected to start trading on Thursday, June 25.
 
Based in Atlanta, Invesco is a newly formed REIT to invest in government-backed securities.
 
Underwriters: Credit Suisse and Morgan Stanley are joint-lead managers. Acting as co-managers are Barclays Capital; Keefe, Bruyette & Woods; Stifel Nicolaus; Jackson Securities; Siebert Capital Markets and The Williams Capital Group.
 
Medidata Solutions(Nasdaq: MDSO – proposed)plans to price 6.3 million shares at $11 to $13 each to raise about $75.6 million. The IPO is expected to start trading on Thursday, June 25.
 
Based in New York City, Medidata is a provider of data capture, management, and reporting solutions for pharmaceutical, biotechnology, medical device and research organizations. The company derives a majority of its revenues from its Medidata Rave application. Here are some noteworthy financials:
  • For the three months ending March 30, 2009, Medidata reported net income of $1.7 million, UP from a deficit of $8.6 million for the same period a year ago. 
  • For the three months ending March 30, Medidata reported total revenues of $33.6 million, UP from $21 million for the same period a year ago. 
Underwriters: Citi and Credit Suisse are joint-lead managers. Acting as co-managers are Jefferies and Needham.
 
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