Ever since the stock
began plunging in late July, a wide range of companies that had
intended to conduct an
Initial Public Offering (IPO)
changed their mind. S-1 registrations that were on file with the
Securities & Exchange
(SEC) were summarily pulled, and a current roster of pending IPOs
is as slim as it's been in several years.
Groupon (Nasdaq: GRPN)
changes everything. A 35% jump in first-day trading last Friday,
Nov. 4, convinced yet-to-be-public companies, and the investment
bankers that advise them, that the time may be indeed ripe to
Should You Invest in Groupon?
After all, the broader stock market has taken on a rosier glow in
recent weeks, and barring any further major downdrafts, the process
of lining up interest in coming IPOs has already begun. That said,
bringing a company public takes time. As a result, look for few
major IPOs for the rest of 2011, but a possible tidal wave them in
the first half of 2012. Here are five IPOs that you'll need to
1. Angie's List
This is actually set to be a 2011 IPO, if the company goes public
on Nov. 17 as planned under the ticker ANGI. This is a fairly
: Subscribers get real-time, candid feedback on local suppliers
such as contractors, cleaning services and other local merchants --
sort of a Better Business Bureau that is more on the consumer's
side and less on the business' side. The company managed to boost
sales 46% to $63 million in its third quarter, but you should know
that the company is also losing money at a rising pace. Angie's
List has consumed a lot of dough to build up a user base that now
exceeds 1 million.
The key, in this highly-automated business model, is to prove that
expenses will stop growing so quickly, and that the company can
reach break-even by 2012 or 2103 -- at the latest. The near-term
losses may make this a tougher sell than the Groupon IPO. In its
favor, Angie's List doesn't appear to have a lot of copycat
business models looking to steal
, as is the case with Groupon. (Bank of America/Merrill Lynch is
, in case you have an account with them and want to score pre-IPO
Right now, this IPO looks likely to take place in the first quarter
of 2012, but if the company scrambles, an IPO could take place
before the end of the year. The maker of popular games such as
FarmVille and CityVille simply stole the thunder from traditional
gaming companies like
Electronic Arts (Nasdaq: ARTS)
Take Two Interactive (Nasdaq: TTWO)
with a move to quickly develop games for websites such as Facebook.
Zynga is keeping investors abreast of business trends in advance of
any IPO. Third-quarter sales rose 80% from a year ago to $307
million. A billion-dollar annual run rate after only a few years in
existence is nothing to sneeze at.
Zynga has nearly 7 million subscribers, and the key will be the
level of "stickiness" those customers represent (i.e. are these
recurring customers?). To be sure, any IPO proceeds would lead
Zynga to quickly accelerate game development and marketing efforts,
hopefully before the next hot industry upstart comes along with the
games that supplant FarmVille and CityVille.
This website operator focuses on consumer reviews of restaurants,
shopping, hotels and other niches. The company was ambling toward
the IPO gate this summer, just in time for the market to turn ugly
in late July. Since then, the company's intentions have become a
little murkier. Management insists that an IPO is still in the
cards, though since a
has yet to be filed, an IPO this coming winter is the most likely
Yelp is kind of like a Zagat's on steroids. That company made its
name as a restaurant
though Yelp's interactive feedback nature. Along with its role in
many other categories beyond restaurants, the company could start
to look even more appealing. As a point of reference,
Google (Nasdaq: GOOG)
agreed to buy Zagats in September for $151 million. Yelp's backers
likely aim to value their company many times higher.
4. Carlyle Group
For any fans of the TV show "Fringe," you know of "Massive
Dynamics," the secretive government contractor that had a hand in
many lines of business it can't even discuss. Well, the Carlyle
Group should also appeal to the cloak-and-dagger set. As the
company has evolved and management realized that a public offering
was the best way for its investors to cash out, some of the more
shadowy businesses have been sold off. These days, Carlyle looks a
bit more like a venture-capital firm focused on defense and
An early 2012 IPO, valuing the company at more than $8 billion, may
actually be something of a bargain. That valuation would put it at
a discount to other publicly-traded firms such as
Blackstone Group (
, in terms of price-to-assets.
This Hispanic market media giant was taken private in 2007 for a
hefty $13 billion. As the S&P 500 has fallen some 20% since
then, it's not clear that the firm's backers -- a consortium of
shops -- will get that money back in the likely 2012 offering. Yet
they can be counted on to pull out much of its cash and
it up with debt in order to ensure themselves a respectable payday,
regardless of the IPO size. As a result, IPO buyers will likely be
buying into a debt-laden business model, which could run into real
trouble if the U.S., Mexican and South American economies suffer.
Then again, if these economies can build a head of steam, Univision
would be a solid angle to play the still-growing Hispanic media
Risks to Consider:
Further market weakness would keep the IPO market in lockdown
mode for a considerable time to come.
Action to Take -->
Every IPO has its price, and until you know how each company is
being valued, either before or after the IPO, you should look
before you leap. If you have a relationship with a brokerage firm
that serves as an underwriter in these offerings, then you may want
to get a piece of the deal. (If not, it's often best to wait for a
post-IPO stock to lose its first-day luster. Groupon, for example,
is off nearly 15% from its first day intra-day high). Yet as I've
noted before, investing after the IPO but before the "
" ends may be a profitable trade. Analysts at these
firms invariably tend gush about new business models, causing these
new IPOs to surge after the "quiet period" is through.
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.