Traditionally, Thanksgiving week’s IPO calendar is light, and this week follows the pattern. Bankers list six deals; two are new faces on the calendar and the rest are carryovers from past ones.
The new faces are CreditCards.com (Nasdaq: CCRD proposed) and SuccessFactors (NYSE: SFSF proposed) and each is slated to start trading on Tuesday morning. Neither deal is expected to explode in the aftermarket, according to the investment professionals making up Wall Street’s consensus of opening premiums (SCOOP ratings), but each is expected to do well.
CreditCards.com is an Austin, Texas-base online business service connecting consumers with multiple credit-card issuers.
The company has experienced rapid revenue growth, reporting $44.6 million for the nine months ended Sept. 30, 2007, versus $42.9 million for the year ended Dec. 31, 2006. That’s good, but sales and marketing costs and interest expenses have surged and created a drag on net income.
For the nine months ended Sept, 30, CreditCards.com reported net income of $2.2 million versus $18.4 million for the year ended Dec. 31.
For the nine months ended Sept. 30, sales and marketing expense rose to $21.8 million versus $19.7 million for the year ended Dec. 31. And interest expense rose to $10.3 million versus $1.5 million over the same time frame.
SuccessFactors is a San Mateo, California-based provider of on-demand performance and talent management software solutions. This is human resources software designed to let companies “optimize the performance of their people to drive business results,” according to the prospectus.
The company has solid revenue growth, reporting $44.1 million for the nine months ended Sept. 30, 2007, versus $32.6 million for the year ended Dec. 31, 2006. That’s good. But the company has never produced a profit. It reported an accumulated deficit of $115 million as of Sept 30.
For the nine months ended Sept. 30, SuccessFactors reported a net loss of $49.2 million versus a net loss of $32 million for the year ended Dec. 31, 2006.
So there you have the IPO highlights for this week.
A Gourmet Appetite
But the IPO market has been a busy place over the last two weeks in a volatile stock market that has taken more than a few dizzying dives. Consider the following:
On Friday, Nov. 16, 2007, the Nasdaq Composite Index, the barometer of the IPO market, closed at 2,637.24, DOWN 6.16 percent from its close at 2,810.38 on Nov. 2.
A down market is generally not a breeding ground for IPOs, but 16 companies filed plans to go public over the last two weeks, according to the U.S. Securities and Exchange Commission filings. They are looking to raise about $12.8 billion.
Since Monday, Nov. 5, bankers have priced 24 IPOs, excluding six “blank check” companies. The 30 deals raised $7.4 billion.
Along the way, six companies withdrew their plans to go public and five more IPOs were postponed “due to market conditions.” But the IPO market continues to be very selective.
On Friday, Nov. 16, 12 of the 24 non-blank-check IPOs closed above their initial offering prices. There were 10 losers and two closed unchanged. The average gain of the 24 was 2.58 percent -– still much better than the underlying stock market. It was down over 6 percent.
Reading the cover of the final prospectus and comparing it with the proposed pricing terms continues to tell you what to expect in the aftermarket.
Since Nov. 5, seven of the 24 IPOs were priced above their filing ranges. On Nov. 16, all closed above their initial offering prices with an average aftermarket gain of 26.5 percent.
Since Nov. 5, nine IPOs were priced below their filing ranges. On Nov. 16, three closed above their initial offering prices, four closed below and two were unchanged. The average aftermarket loss for all nine was 11.1 percent.
These numbers tell a story. And it’s not a tale of a dwindling market. Instead, the message is clear: There is a demand for IPOs, but investors are being highly selective.
The appetite is gourmet — not buffet.