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 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
Winner: Blackstone Group

  • Ticker: (NYSE: BX  )
  • Industry: Asset manager and financial service advisory firm
  • Deal terms: 133.3 million shares, $31 per share; $3 billion non-voting common units sold to China at a 4.5% discount
  • Lead managers: Morgan Stanley and Citigroup
  • Filed: March 22
  • Opening day: June 22, opened at $36.45, closed at $35.06, 13.1% gain
  • Bleacher banter: Pushed up proposed offering date from early next week and priced at high end of its proposed range; the largest IPO in nearly five years and launched successfully despite a negative equity market and a potential change in its tax status.

Loser: Care Investment Trust

  • Ticker: (NYSE: CRE  )
  • Industry: REIT
  • Deal terms: 15 million shares, $15 per share
  • Lead managers: Credit Suisse and Merrill Lynch
  • Filed: March 29
  • Opening day: June 22, opened at $13, closed at $13.50, 10% loss
  • Bleacher banter: Priced at lower end of its proposed range and sold 3.8 million fewer shares than originally proposed.

On deck
AuthenTec

  • Proposed ticker: Nasdaq: AUTH
  • Industry: Semiconductor provider
  • Proposed deal terms: 7.5 million shares, $9-$11 per share
  • Lead manager: Lehman
  • Filed: March 16

ComScore

  • Proposed ticker: Nasdaq: SCOR
  • Industry: Digital marketing intelligence provider
  • Proposed deal terms: 5 million shares, $14-$16 per share
  • Lead managers: Credit Suisse and Deutsche Bank
  • Filed: April 2

Data Domain

  • Proposed ticker: Nasdaq: DDUP
  • Industry: Digital marketing intelligence provider
  • Proposed deal terms: 7.4 million shares, $11.50-$13.50 per share
  • Lead managers: Goldman Sachs and Morgan Stanley
  • Filed: March 30

Polypore International

  • Proposed ticker: NYSE: PPO
  • Industry: Battery membrane producer
  • Proposed deal terms: 15 million shares, $20-$22 per share
  • Lead manager: JP Morgan
  • Filed: March 14

PROS Holding

  • Proposed ticker: NYSE: PRO
  • Industry: Software provider
  • Proposed deal terms: 6.8 million shares, $10-$12 per share
  • Lead managers: JP Morgan and Deutsche Bank
  • Filed: April 4

Quark Pharmaceuticals

  • Proposed ticker: Nasdaq: QURK
  • Industry:  Pharmaceuticals
  • Proposed deal terms: 5 million shares, $12-$14 per share
  • Lead managers: JP Morgan and Deutsche Bank
  • Filed: March 30

ShoreTel

  • Proposed ticker: Nasdaq: SHOR
  • Industry: Telecom provider
  • Proposed deal terms: 7.9 million shares, $8.50-$10.50 per share
  • Lead managers: Lehman and JP Morgan
  • Filed: Feb. 12

Spectra Energy Partners

  • Proposed ticker: NYSE: SEP
  • Industry: Energy partnership
  • Proposed deal terms: 10 million shares, $19-$21 per share
  • Lead managers: Citigroup and Lehman
  • Filed: Machr 30

Spreadtrum Communications

  • Proposed ticker: Nasdaq: SPRD
  • Industry: Chinese semiconductor provider
  • Proposed deal terms: 8.8 million American depositary shares, $11-$13 per share
  • Lead managers: Morgan Stanley and Lehman
  • Filed: June 6

Game of the week
Let's take a look at Data Domain.

The California-based company was formed in 2001 and provides capacity-optimized storage appliances for disk-based backup and network-based disaster recovery. An alternative to tape-based protection storage systems, its appliances reduce the storage of redundant copies of data and associated storage costs. Products are sold through a network of channel partners and a direct sales force. At the end of March, the company had more than 100 channel partners, and appliances had been purchased by more than 750 customers worldwide.

Like many young techs, Data Domain has not turned a profit for any fiscal year. The company generated revenues of $46.4 million and a net loss of $4 million in 2006, compared to revenues of $8.1 million and a net loss of $13.8 million in 2005. Through the end of the quarter closed in March, the company generated revenues of $20.2 million and a net loss of $1.5 million, compared to revenues of $7.9 million and a net loss of $749,000 for the same period a year ago. The company had an accumulated deficit of approximately $38.1 million at the end of March.

The company cites a report from an industry research firm which estimates that revenues from the sale of capacity-optimized storage solutions will grow from $262 million in 2007 to more than $1.6 billion in 2010, which reflects a compound annual growth rate of 83%. Data Domain believes that its appliances are characterized by their cost-effectiveness, ease of use, high performance, reliability, and compatibility with existing backup software.

The company seeks to follow a strategy which includes focusing sales efforts in the protection storage market, growing its network of channel partners and direct sales organization, investing in research and development, broadening relationships with existing technology partners and establishing new partnerships, and deploying its systems in other sectors of the storage market, such as archival storage. Proceeds from the offering will be used for working capital and other general corporate purposes, including possible acquisitions.

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
Dice Holdings, a career website operator, announced deal terms of 16.7 million shares at $11-$13 per share. The lead managers are Credit Suisse and Morgan Stanley.

Lululemon, an athletic apparel retailer, announced deal terms of 18.2 million shares at $10-$12 per share. The lead managers are Goldman Sachs and Morgan Stanley.

Sent down to the minors
There were no postponements of planned offerings.

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

Athenahealth

  • Proposed ticker: Nasdaq: ATHN
  • Industry: Internet-based business services provider
  • Proposed deal terms: Not yet determined
  • Lead managers: Goldman Sachs and Merrill Lynch
  • Filed: June 22

Heritage-Crystal Clean

  • Proposed ticker: Nasdaq: HCCI
  • Industry: Cleaning and waste services provider
  • Proposed deal terms: Not yet determined; concurrent $14 million equity private placement
  • Lead managers: William Blair and Piper Jaffray
  • Filed: June 19

Global Energy

  • Proposed ticker: Nasdaq: GEGT
  • Industry: Gasification company
  • Proposed deal terms: Not yet determined
  • Lead managers: JP Morgan
  • Filed: June 20

MAP Pharmaceuticals

  • Proposed ticker: Nasdaq: MAPP
  • Industry: Drug developer
  • Proposed deal terms: Not yet determined
  • Lead managers: Merrill Lynch, Morgan Stanley, and Deutsche Bank
  • Filed: June 18

SandRidge Energy

  • Proposed ticker: NYSE: SD
  • Industry: Natural gas and oil company
  • Proposed deal terms: Not yet determined
  • Lead managers: Lehman, Goldman Sachs, and Banc of America
  • Filed: June 22

Vitacost.com

  • Proposed ticker: Nasdaq: VITC
  • Industry: Health product retailer
  • Proposed deal terms: Not yet determined
  • Lead managers: Thomas Weisel, Robert Baird, and Cantor Fitzgerald
  • Filed: June 21

Disabled list
Cinema operator AMC Entertainment withdrew its planned offering, without citing reasons.

Champions
Meet our current champs. Among companies that went public during the last 12 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  )

355.1%

Tech

9/20/06

First Solar (Nasdaq: FSLR  )

323.2%

Solar module provider

11/16/06

New Oriental Education (NYSE: EDU  )

241.9%

Chinese educational services

9/6/06

Omniture (Nasdaq: OMTR  )

217.8%

Software provider

6/27/06

J. Crew (NYSE: JCG  )

164.2%

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 12 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  )

(65.6%)

Ethanol producer

6/28/06

MEDecision (Nasdaq: MEDE  )

(52.1%)

Medical software provider

12/12/06

Netlist (Nasdaq: NLST  )

(51.0%)

Memory device maker

11/29/06

Achillion Pharmaceuticals (Nasdaq: ACHN  )

(47.9%)

Drug developer

10/25/06

XTENT (Nasdaq: XTNT  )

(44.6%)

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 lost last week, but the IPO players suffered a little less than the general market. The IPO Plus Aftermarket (FUND: IPOSX  ) , a mutual fund, slipped just 0.1%, while fellow IPO player First Trust IPOX 100 (AMEX: FPX  ) , an ETF, declined 0.9%. The Nasdaq fell 1.4% and the Russell 2000 dropped 1.6%.

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 Motley Fool Global Gains newsletter recommendation. Omniture is a Stock Advisor selection.

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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