Time for Easter?

A rebound in the markets has many thinking we may be heading for a “resurrection” of a robust IPO market in the coming weeks.

The IPO market is moving along, although some of the larger deals — like Apollo, HCA and GNC — are just too boring to be considered IPO Candy.  However, a few others — like Zipcar, Ellie Mae and the recently priced Qihoo 360 — are all part of our IPO ecosystem.

There were 15 new filings in the last two weeks.  Many are in energy and finance, but there are quite a few that look to be in our sweet spot.  These include NetQin Mobile (mobile security technology services in China), Cortina Systems (broadband semis), and Sequans Communications (broadband semis).

This week we are working on a research note on Zipcar, which should be published before pricing.  We’re also looking for updated filings for other closely watched companies like Pandora so we can update our preliminary IPO preview notes.

Performance

This month we included additional performance analysis for both the month of March and the quarter.  See the tables at the end of this report for the full analysis.  Here we’ll focus on the quarterly performance.

For the quarter the average stock in the IPO Candy Ecosystem was up 8%. The top 10 names were up 70% and the bottom 10 were down 31%.

 

We were pleased to see Sky-mobi at the top of the list since it is in our IPO Candy Folio.  It’s also worth noting that many of the top names (Sky-mobi, Broadsoft, TeleNav and OpenTable) are viewed as plays on mobile Internet.

Top 5 for Q1 2011
Company Ticker Gain Area
Sky-mobi MOBI +144% Mobile App S/W China
Broadsoft BSFT +96% Communication S/W
Ventrus VTUS +81% Anal Treatments
Velti VELT +72% Advertising Services
Accretive Health AH +69% Healthcare BPO

The major losers in Q1 were a mixed bag of struggling companies and some solid companies that were substantially re-rated.

Bottom 5 for Q1 2011
Company Ticker Loss Area
SemiLEDS LEDS -46% LED Semiconductors
HiSoft HSFT -39% IT Outsourcing China
A123 Systems AONE -38% Li Batteries
Rosetta Stone RST -38% Language Software
Camelot Info CIS -29% IT Outsourcing China

“Lucky Candy” Update

Besides Sky-mobi, other top names on the Lucky Candy list included ATA, Youku.com, Bitauto and several solar companies (Yingli, Jinko, and Trina.)

On the losing side, in addition to the already-mentioned SemiLEDS, the names included Douyuan Printing and Douyuan Water, which must be related somehow. They both declined 60% in Q1.  There were no real themes evident amongst the major decliners for the quarter.

We do note that Dangdang, the “Amazon.com of China,” has corrected sharply although it’s still above the IPO price.  Investors in new names like Qihoo 360 should be careful.

Selected Company Morsels

Ancestry.com may have some new competition (or perhaps an acquisition target) with the launch of Mocavo, a “genealogy search engine.”  After spending some time with the site, though, it appears to be mostly bogus and simply returning Facebook search results.  Ancestry.com investors should have no fear.

Tesla announced that their new Model S would support third party apps.  It’s a very different world today from the days when we used Bondo and spray paint to personalize our cars.  Now a touch to the screen or a voice command will make it so.

A123 Systems continues to suffer in the market as weak guidance and small orders lead analysts to lower price targets and point investors elsewhere.

Calix announced several new “rural networking” wins and consolidates their acquisition of Occam Networks.

IPO Candy Folio Update

After being down 2.32% for the first two weeks of March, the IPO Candy Folio posted a gain of 4.23% for the month March.  YTD the Folio is up 9.89%.

More information and disclosures regarding the IPO Candy Folio can be found at: /invest.

 

The Pipeline

We’ve updated the pipeline with the new filings and deals in active marketing that we are following.  The two we are following now are Zipcar and Ellie Mae.  As long as pre-announcement season doesn’t hurt current market momentum, we expect to see more deals in active marketing in the next two weeks.

See the updated pipeline table in the IPO Candy Ecosystem for more details.

 

Coverage and the Calendar

There isn’t much scheduled for the first half of April. Coverage is expected for Cornerstone OnDemand on April 26th.  Supporting the current valuation won’t be easy for analysts.

Pacific Biosciences and NetSpend come off lock-up around mid-month but may be subject to additional blackout periods due to quarterly reporting.  Both names are slightly below their IPO price.  Pacific Biosciences (PACB) is a name we like and would keep an eye on in case the newly-released shares push the price down substantially.

[This is the text from the April 4, 2011 Candygram which was sent in PDF form with tables to premium subscribers today.  The PDF is available under the “Candygrams” tab above.]

[Disclosures: None]

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