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 simply can't bear to 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 gives 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

BioFuel Energy

  • Ticker: Nasdaq: BIOF
  • Industry: Ethanol producer
  • Deal terms: 9.5 million shares, $10.50 per share
  • Lead managers: JPMorgan, Citigroup, and A.G. Edwards
  • Filed: Dec. 8
  • Opening day: June 14, opened flat, closed at $10.51, 0.1% gain
  • Bleacher banter: The price range was lowered twice from originally proposed $16-$18 per share. The deal size includes 4.25 million shares offered in a private placement.

BWAY Holding Company

  • Ticker: NYSE: BWY
  • Industry: Container manufacturer
  • Deal terms: 10 million shares, $15 per share
  • Lead managers: Goldman Sachs and Banc of America
  • Filed: March 9
  • Opening day: June 13, opened at $15, closed at $14.60, 2.7% loss
  • Bleacher banter: Priced below its proposed range of $16-$18 per share, it sold 1.8 million fewer shares than planned.

On deck

Care Investment Trust

  • Proposed ticker: NYSE: CRE
  • Industry: REIT
  • Proposed deal terms: 18.8 million shares, $15-$17 per share
  • Lead managers: Credit Suisse and Merrill Lynch
  • Filed: March 29

Game of the week
There's not much to watch this week. Care Investment Trust is a newly organized real estate investment and finance company, formed principally to invest in health-care-related commercial mortgage debt and real estate. The company is externally managed and advised by CIT Healthcare LLC, a wholly owned subsidiary of CIT Group (NYSE: CIT  ) . Sitting this week out and resting up for next week's debut of Blackstone Group might be Fools' most prudent strategy.

Warming up in the bullpen

  • ComScore, a digital marketing intelligence provider, announced deal terms of 5 million shares at $14-$16 per share. The lead managers are Credit Suisse and Deutsche Bank.

  • Polypore, a battery membrane provider, announced deal terms of 15 million shares at $20-$22 per share. The lead manager is JPMorgan.

  • ProsHoldings, a software provider, announced deal terms of 6.8 million shares at $10-$12 per share. The lead managers are JPMorgan and Deutsche Bank.

  • SemGroup, an energy partnership, announced deal terms of 12.5 million shares at $19-$21 per share. The lead managers are Citigroup and Merrill Lynch.

  • ShoreTel, a telecom systems provider, announced deal terms of 7.9 million shares at $8.50-$10.50 per share. The lead managers are Lehman and JPMorgan.

  • Spreadtrum Communications, a Chinese semiconductor provider, announced deal terms of 8.8 million American depositary shares at $11-$13 per share. The lead managers are Morgan Stanley and Lehman.

Sent down to the minors
GeoVera Insurance, a specialty insurance provider, postponed its offering slated for last week.

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

Pzena Investment Management

  • Proposed ticker: NYSE: PZN
  • Industry: Asset manager
  • Proposed deal terms: Not yet determined
  • Lead managers: Goldman Sachs, UBS, and Banc of America
  • Filed: June 11

SS&C Technologies

  • Proposed ticker: Nasdaq: SSNC
  • Industry: Financial services software provider
  • Proposed deal terms: Not yet determined
  • Lead managers: Morgan Stanley, Credit Suisse, and JPMorgan
  • Filed: June 13

ZARS Pharma

  • Proposed ticker: Nasdaq: ZARS
  • Industry: Specialty pharmaceutical
  • Proposed deal terms: Not yet determined
  • Lead managers: Cowen and CIBC
  • Filed : June 11

Disabled list
Aegerion Pharmaceuticals, a drug developer, withdrew its planned offering, citing market conditions.

Champions
Meet our current champs. Among companies that went public during the last twelve months, these firms' percentage returns from their offer prices to their most recent closing prices rank them as the top five players:

Company

Return

Description

IPO Date

Riverbed Technology (Nasdaq: RVBD  )

+326.4%

Tech

9/20/06

First Solar (Nasdaq: FSLR  )

+290.5%

Solar module provider

11/16/06

New Oriental Education (NYSE: EDU  )

+222.6%

Chinese educational services

9/6/06

Omniture (Nasdaq: OMTR  )

+183.5%

Software provider

6/27/06

J. Crew (NYSE: JCG  )

+160.2%

Apparel retailer

6/27/06

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

Company

Return

Description

IPO Date

Aventine Renewable Energy (NYSE: AVR  )

-64.6%

Ethanol producer

6/28/06

Achillion Pharmaceuticals (Nasdaq: ACHN  )

-55%

Drug developer

10/25/06

MEDecision (Nasdaq: MEDE  )

-54%

Medical software provider

12/12/06

Netlist (Nasdaq: NLST  )

-50.7%

Tech

11/29/06

XTENT (Nasdaq: XTNT  )

-43.2%

Medical device maker

1/31/07

Groupies & 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 advanced last week, with the IPO players outperforming the general market. The IPO Plus Aftermarket (FUND: IPOSX  ) , a mutual fund, and fellow IPO player First Trust IPOX 100 (AMEX: FPX  ) , an ETF, tied for first with gains of 2.4%. The Nasdaq rose 2.1% and the Russell 2000 increased 1.5%.

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

We're publicly offering further Foolishness:

Sources: IPO Scoop.com, Renaissance Capital's IPOhome.com, SEC filings, Reuters.

New Oriental Education is a Global Gains newsletter recommendation. Omniture is a Stock Advisor selection. JPMorgan Chase and Bank of America are Income Investor picks. Try any of our Foolish newsletters free for 30 days.

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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