Scouting the Latest IPOs

Just like opening day at the ballpark, investing in new IPOs holds the potential for shining promise and crushing disappointment. If you can't bear to just cheer on your favorites from the sidelines, at least be careful about investing in this league. Many new issues swing for the fences during their first trading days, only to slump once marketing hype has given way to mundane earnings reports.

Don't commit an error by stocking your entire portfolio with rookies. Allocate just a small percentage of your risk capital to IPOs. Scout your potential phenoms carefully, and be choosy about composing your own rotisserie league. Investing with an eye for a season extending long beyond opening day will reward you with quality players capable of staying in the game. With that in mind, we offer our Foolish scouting report of the latest IPOs.

Last week's games

Infinera

  • Ticker: Nasdaq: INFN
  • Industry: Optical systems company
  • Deal terms: 14 million shares, $13 per share
  • Lead manager: Goldman Sachs
  • Filed: Feb 26
  • Opening day: June 7, opened at $16.04, closed at $19.71, 51.6% gain 
  • Bleacher banter: Priced above its proposed range of $12 to $14 per share; its 93.5% return as of the close of last week is the best debut so far this year

Limelight Networks

  • Ticker: Nasdaq: LLNW
  • Industry: Content delivery service provider
  • Deal terms: 16 million shares, $15 per share
  • Lead managers: Goldman Sachs and Morgan Stanley
  • Filed: March 23
  • Opening day: June 8, opened at $22.56, closed at $22.18, 47.9% gain
  • Bleacher banter: Priced above its increased range of $12 to $14 per share, and the offering was increased by 1.6 million shares

Starent Networks

  • Ticker: Nasdaq: STAR
  • Industry: Wireless infrastructure equipment provider
  • Deal terms: 10.5 million shares, $12 per share
  • Lead managers: Goldman Sachs and Lehman
  • Filed: March 6
  • Opening day: June 6, opened at $13.75, closed at $14.01, 16.8% gain
  • Bleacher banter: Priced above its proposed range of $9 to $11 per share

FBR Capital Markets

  • Proposed ticker: Nasdaq: FBCM
  • Industry: REIT
  • Proposed deal terms: 12 million shares, $17 per share
  • Lead managers: Friedman Billings
  • Filed: April 10
  • Opening day: June 8, opened at $18, closed at $18, 5.9% gain
  • Bleacher banter: Priced at midpoint of its proposed range

Einstein Noah Restaurant Group

  • Ticker: Nasdaq: BAGL
  • Industry: Specialty restaurant operator
  • Deal terms: 5 million shares, $18 per share
  • Lead managers: Morgan Stanley and Cowen
  • Filed: April 10
  • Opening day: June 8, opened at $18.05, closed at $18.23, 1.3% gain
  • Bleacher banter: Priced below its proposed range of $19 to $21 per share

Response Genetics

  • Ticker: Nasdaq: RGDX
  • Industry: Diagnostic test developer
  • Deal terms: 3 million shares, $7 per share
  • Lead managers: Morgan Stanley and UBS
  • Filed: May 11
  • Opening day: June 5, opened flat, closed flat, 0% gain 
  • Bleacher banter: Priced at low end of its proposed range; deal held over from previous week

Yingli Green Energy

  • Ticker: NYSE: YGE
  • Industry: Chinese photovoltaic manufacturer
  • Deal terms: 29 million American depositary shares, $11 per share
  • Lead managers: Goldman Sachs and UBS
  • Filed: May 11
  • Opening day: June 8, opened at $10.80, closed at $10.50, 4.5% loss
  • Bleacher banter: Priced at low end of its proposed range and scored a disappointing return for this once-hot sector

On deck

Aegerion Pharmaceuticals

  • Proposed ticker: Nasdaq: AEGR
  • Industry: Drug developer
  • Proposed deal terms: 5 million shares, $12 to $14 per share
  • Lead managers: Lehman and CIBC
  • Filed: March 21

BioFuel Energy

  • Proposed ticker: Nasdaq: BIOF
  • Industry: Ethanol producer
  • Proposed deal terms: 9.5 million shares, $16 to $18 per share
  • Lead managers: JPMorgan, Citigroup, and A.G. Edwards
  • Filed: Dec. 8

BWAY Holding Co.

  • Proposed ticker: NYSE: BWY
  • Industry: Container manufacturer
  • Proposed deal terms: 11.8 million shares, $16 to $18 per share
  • Lead managers: Goldman Sachs and Bank of America
  • Filed: March 9

Geovera Insurance Holdings

  • Proposed ticker: Nasdaq: GEOV
  • Industry: Specialty property insurer
  • Proposed deal terms: 5.9 million shares, $16 to $18 per share
  • Lead managers: JPMorgan and Merrill Lynch
  • Filed: March 26

Game of the week
Let's take a look at Geovera Insurance. Given the recent strong performance of Caymans-based property and casualty reinsurer Greenlight Capital Re (Nasdaq: GLRE  ) , which went public on May 23 and has since gained 24.4% from its offering price, this offering could be the most popular from this week's lineup.

Geovera was formed in 1993 as a division of United States Fidelity and Guaranty, which through various mergers became a unit of Travelers (NYSE: TRV  ) before being acquired by an investor group in November 2005. The Bermuda-based company provides specialty residential property insurance products, focused on two business lines that it believes are enduring dislocations and in which it has strong underwriting expertise. Specialty homeowners products, accounting for 59.8% of the company's business last year, are sold through a network of about 30 wholesale surplus lines brokers on a non-admitted, or excess and surplus lines basis, in hurricane-prone states. Residential earthquake products, accounting for 40.2% of the company's business last year, are sold through about 1,600 independent brokers and agents on an admitted basis in earthquake-prone states.

Geovera's finances are strong, seen in the A- rating given to its insurance subsidiaries by A.M. Best, as well as its statutory capital and surplus of $248.9 million as of Dec. 31, 2006. The company is also indemnified by United States Fidelity and Guaranty for all losses occurring prior to Nov. 1, 2005. Geovera generated revenue of $175 million and net income of $35.5 million in 2006. Through the end of the quarter closed in March, the company generated revenue of $50.3 million and net income of $13.4 million, compared with revenue of $40 million and net income of $6.3 million for the same period a year ago.

Management believes that Geovera's emphasis on its target markets; its automated, "no-exceptions" individual risk underwriting platform; and its flexibility as a non-admitted primary insurer (complemented by its strong balance sheet), will help it continue to compete profitably and to grow. The company selectively targets new areas with specialized products and focuses on profitability rather than market share. Proceeds from the offering will be used for the capital of its insurance subsidiaries, among other things.

Shares are expected to begin trading Wednesday. As always, make sure you do your own warm-ups and read through a company's offering documents, including the risk factors, before getting in on the game. 

Warming up in the bullpen
Authentec, a semiconductor provider, announced deal terms of 7.5 million shares at $9 to $11 per share. The lead manager is Lehman.

Care Investment Trust, a real estate investment trust, announced deal terms of 18.75 million shares at $15 to $17 per share. The lead managers are Credit Suisse and Merrill Lynch.

Data Domain, a storage appliance provider, announced deal terms of 7.4 million shares at $11.50 to $13.50 per share. The lead managers are Goldman Sachs and Morgan Stanley.

Limco-Piedmont, an aerospace services provider, announced deal terms of 4 million shares at $9.50 to $11.50 per share. The lead managers are Oppenheimer and Stifel Nicolaus.

Quark Pharmaceuticals, a therapeutics developer, announced deal terms of 5 million shares at $12 to $14 per share. The lead managers are JPMorgan and Banc of America.

Sent down to the minors
No planned offerings were postponed last week.

Minor-league developments
Get ready, get set ... not yet! The latest major filings announced during the last week include:

Spreadtrum Communications

  • Proposed ticker: Nasdaq: SPRD
  • Industry: Chinese semiconductor manufacturer
  • Proposed deal terms: Not yet determined
  • Lead managers: Morgan Stanley and Lehman  
  • Filed: June 6

Disabled list
BGC Partners
, an interdealer financial broker, withdrew its planned offering due to its merger with eSpeed.

Covidien International Finance SA and Tyco Electronic Group SA, entities formed in connection with the breakup of Tyco (NYSE: TYC  ) , withdrew their planned offerings

Champions
Among companies that went public during the past 12 months, these firms' percentage returns from their offer prices to their most recent closing prices rank them as the top five players:

Company

Ticker

Return

Description

IPO Date

Riverbed Technology

(Nasdaq: RVBD  )

317.1%

Tech

9/20/06

First Solar

(Nasdaq: FSLR  )

256.1%

Solar module provider

11/16/06

Synchronoss Technologies

(Nasdaq: SNCR  )

229.8%

Telecom software provider

6/14/06

New Oriental Education

(NYSE: EDU  )

204.5%

Chinese educational services

9/6/06

Omniture

(Nasdaq: OMTR  )

183.5%

Software provider

6/27/06

Benchwarmers
Now meet our benchwarmers -- that's nicer to say than "losers," isn't it? Among companies that went public during the past 12 months, these firms' percentage returns from their offer prices to their most recent closing prices rank them as the bottom five players:

Company

Ticker

Return

Description

IPO Date

Aventine Renewable Energy

(NYSE: AVR  )

(62.1%)

Ethanol producer

6/28/06

Netlist

(Nasdaq: NLST  )

(55.7%)

Tech

11/29/06

Achillion Pharmaceuticals

(Nasdaq: ACHN  )

(53.2%)

Drug developer

10/25/06

MEDecision

(Nasdaq: MEDE  )

(47.5%)

Medical software provider

12/12/06

XTENT

(Nasdaq: XTNT  )

(43.8%)

Medical device maker

1/31/07

Groupies and fan clubs
If you don't want to declare your loyalties for specific players, but still want to enjoy the action, consider subscribing to an IPO-focused mutual fund or exchange-traded fund. Of course, do your scouting homework here, too, and make sure you read their prospectuses before buying season tickets.

All our players were injured in last week's ugly equity performance, but the week's laggard, the mutual fund IPO Plus Aftermarket (FUND: IPOSX  ) , emerged the least harmed with a slip of 0.4%. Fellow IPO player First Trust IPOX 100 (AMEX: FPX  ) , an exchange-traded fund, wound up down 1.7%, while the Nasdaq fell 1.5% and the Russell 2000 dropped 2.1%.

Keep reading the Fool to see how your favorite players perform as they mature!

We're publicly offering further Foolishness:

Our sources include IPO Scoop.com, Renaissance Capital's IPOhome.com, SEC filings, and Reuters.

Bank of America and JPMorgan are Motley Fool Income Investor recommendations. Tyco is an Inside Value selection. New Oriental Education & Technology Group is aGlobal Gains pick, and Omniture is a Stock Advisor pick. Take a 30-day free trial and see why all these newsletters are beating the S&P 500. 

Fool contributor S.J. Caplan roots for the Cleveland Indians when her husband is watching, and for the Boston Red Sox when he leaves the room. She owns shares of Goldman Sachs, but otherwise holds no financial position in any firms or funds mentioned here. The Fool has a disclosure policy.


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