The text below was featured in our September 1st Candygram. For the full edition with the tables included please see IPO Candygram Sept 1 2010 Final.


There has been some press coverage suggesting that IPO performance may be turning “sour” due to poor returns that have come from either weak companies or pricings that were too high relative to valuation. The IPO market is a market just like any other and that means that stock selection, valuation analysis and risk management have to be used. There are certainly quite a few sour offerings like A123 Systems, Motricity, CBOE and Dynavox, to name a few, down sharply from their offering price. In the case of A123 Systems, CBOE and Motricity, our published research and Intrinsic Valuation made it clear they these were not attractive at the IPO price.

And there have been some major winners, notably Open Table, LogMeIn, Fortinet, Qlik, HiSoft Technology, Camelot Info Systems, and Digital Globe. A few of these have not even seen a pullback in their stock prices. This group is up on the order of 100%. Of course not all of these will continue their progress without interruption.

On the sweet side of the last two weeks of IPO performance were two China-based technology service companies, HiSoft and Camelot Info Services. HiSoft was up 58% on a strong quarterly report. Camelot was up 35% on a strong quarter plus positive research coverage from the banking analysts. Qlik is a BI software company that had a notable move of up 31% on the back of a strong quarter and positive banking analyst coverage. It’s also worth noting that the stock now trades very close to the price targets of the analysts following the stock.

Turning to the sour side of the recent market shares we have Fabrinet, SMART Technologies, Global Defense Technology, Dynavox and Financial Engines, which were all off between 16-19% in the last two weeks. (We did post our notes on Dynavox and the quarterly report via the blog.)

In the cases of Fabrinet and Financial Engines it looks like the stories are still intact with solid quarterly reports that triggered some short-term thinking and selling.

Coverage & the Calendar

We had some initiations of coverage right on cue from the investment bankers on Ameresco, Camelot Information Systems, Qlik, RealD and SMART Technologies. Nothing too surprising in any of these cases with mostly outperform and buy ratings. We’ve added the average price targets to the ecosystem overview spreadsheet.

There’s not much currently scheduled and, like many, we may have to give up on SurgiVision, which is a development stage MRI surgical navigation company that is intriguing. They’ve lowered the price all the way to $5 but it may still not be done.

Some new coverage is expected in the next two weeks for Green Dot, Envestnet, MediaMind, NXP Semiconductors and IntraLinks.

Lastly, be aware that shares will exit lockup for Sensata Technologies and Financial Engines.

Next week we anticipate seeing the flow of the IPO market pick up once again and move into what could be a pretty busy season given the large number of filings in the queue.

Some names we will be eagerly watching for include Skype, Zipcar, InvenSense, NeoPhotonics and Demand Media.

[Disclosure: none]

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