It took awhile, but theIPO market is heating up.
Recent deals have performed so well thatinvestment bankers are
hustling the next crop up to the starting gate at a rapid pace.
You can't blame them. A shift in the markets can shut the IPO
market down, so these firms and their bankers are looking to
strike while the iron is hot.
Of course, investors only have access to these deals if they
have a brokerage account with one of the company's underwriters.
If you have accounts with any investment banks, it pays to give
yourbroker acall and see what deals the firm isunderwriting .
Expecting triple-digitgains (sometimes in a matter of weeks)
-- as these IPOs have generated -- is unrealistic. But as long as
thestock market stays aloft, many coming IPOs could easily tack
on 20% to 40% in aftermarket trading. The IPO market is simply
that frothy right now.
Ironically, thisyear 's most anticipated deals have yet to
materialize. Back in January, I looked at 10 potential
blockbuster IPOs in the tech sector, though none of these firms
has lined up in the near-term IPO pipeline queue. They shouldn't
wait too long. The IPO market can slam shut in the blink of an
eye if the market turns south.
Yet we can take a sneak peek at companies that have already
filed to go public in coming weeks and months. Here are seven
firms to watch.
|1. Phillips 66 Partners
Investors in energy pipeline masterlimited partnerships
(MLPs) are likely to give this deal a close look. The
backing of such a large corporate parent could give this
offspring access to some sweetheart deals. Bankers are
completing the paperwork, and the IPO, using the ticker
PSXP, come arrive any day now.
JPMorgan Chase (
is thelead underwriter (though your broker may also be "on
the cover" of the deal book, which could enable you to
getshares at theoffering price ).
|2. WCI Communities
This may be a familiar name. It was a high-end homebuilder
that crashed and burned after the 2008 housing crisis. A
focus on Florida explains why this builder went
intobankruptcy . Yet a resurgent Floridianreal estate
market explains why it's time to go public again. The high
end of the real estate market is indeed the place to be,
but this deal won't likely be much of a bargain considering
homebuilding peers have already seen their shares bid up
sharply over the past few years.
is acting as lead underwriter; the tickerwill be WCIC.
|3. Associated Materials
This is a play on the various materials used in new and
used home construction, and like WCI, may be attractive to
housing market bulls. Yet be warned that this company
remains unprofitable and will still have a heftydebt load
even after the IPO is completed. As a result, it may be
wise to buy shares only if they are priced at a very
attractive discount to the peer group.
Goldman Sachs (
will be theunderwriter , though noticker symbol has yet
|4. Agios Pharmaceuticals
Biotechstocks are in high demand, both as IPOs and as
already public companies. And this one should be as hot as
any, thanks to the backing of biotech superstar
Celgene (Nasdaq: CELG)
. Agios is developing drugs that starve cancer cells by
blocking the mutated metabolic enzymes that feed them.
However, Agios is only now entering clinical trials, and it
will be several years before any drugs hit the market. And
that of course assumes that the clinical trials will be
My preferred strategy: If you can't buy the shares at the
IPO, wait for the inevitable return to earth that besets
all biotechs at some point in their multi-year drug testing
cycle. These kinds of stocks tend to drift out of
investors' minds during Phase I and Phase II testing.
JPMorgan will act as the lead underwriter.
|5. Jones Energy
The timing for this natural gas driller is a bit suspect.
Weak gas prices have recently rendered the Austin,
Texas-based firm unprofitable, and it would have been
preferable to seek an IPO when gas prices are higher.
Still, Jones appears unable to wait much longer, as it
needs thecash to keep up with its drilling plans. JPMorgan
is the lead banker, and this stock will trade under the
|6. Onconova Therapeutics
As noted, investors are snapping up biotech stocks with
abandon right now, though interms of IPOs, the field is
mostly confined to companies that are only in the early
stages of drug testing.
Onconova is the rare biotech that isgoing public while a
key drug is already in Phase III trials, meaning investors
only need to wait for severalquarters and not several years
to find out if the company will succeed. Onconova is
developing rigosertib, which targets pancreatic cancer.
(Other cancers are being targeted in earlier clinical
trials.) Citigroup is the underwriter, and the ticker will
, which has secured Europeansales rights, is one of several
investors in the company.
|7. SFX Entertainment
SFX is the world's largest operator of electronic dance
events, which we old folks used to call "raves." The
company's festivals have often drawn up to 100,000
attendees, which means this IPO will garner plenty of buzz.
But IPO investors may be turned off by the fact that SFX
lost roughly $50 million last year on a base of $242
million inrevenue . An investment in SFX is a wager onCEO
Robert Sillerman, who has made investors considerable
profits with past ventures in the music business. UBS is
the lead underwriter, and the ticker will be SFXE.
Risks to Consider:
Even if you buy these IPOs, it's risky to hold them too long
as they can move out of favor after a quarter or two. That's
often whenanalysts decide to stop covering a company. Moreover, a
drop in the stock market can be especially hard on thesenew
issues , as they lack a long-term track record and entrenched
Action to Take -->
This is shaping up to be one of the strongest years for IPOs in
quite some time, and many of the new issues have generated rapid
and profitable trades. Still, it pays to do a great deal ofdue
diligence on these stocks before buying to ensure that there is a
tangible growth opportunity in place. Remember, it may pay to
call your broker and see whether your firm is underwriting any of
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