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 just 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 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

lululemon athletica

  • Ticker: Nasdaq: LULU
  • Industry: Athletic apparel retailer
  • Deal terms: 18.2 million shares, $18 per share
  • Lead managers: Goldman Sachs and Merrill Lynch
  • Filed: May 1
  • Opening day: July 27, opened at $25, closed at $28 -- 55.6% gain. Click here for a deeper look at the IPO.
  • Bleacher banter: Priced well above its upward revised range of $15-$17 per share and sold 1.8 million more shares than originally planned

BladeLogic

  • Ticker: Nasdaq: BLOG
  • Industry: Data center software provider
  • Deal terms: 5 million shares, $17 per share
  • Lead managers: Morgan Stanley and Merrill Lynch
  • Filed: April 5
  • Opening day: July 25, opened at $24.25, closed at $25.07 -- 47.5% gain.
  • Bleacher banter: Priced above its originally proposed range of $12-$14 per share

PerfectWorld

  • Ticker: Nasdaq: PWRD
  • Industry: Chinese online video game developer
  • Deal terms: 11.8 million shares, $16 per share
  • Lead managers: Morgan Stanley and Credit Suisse
  • Filed: July 2
  • Opening day: July 26, opened at $17.50, closed at $20.40 -- 27.5% gain
  • Bleacher banter: Priced above proposed range of $12-$14 per share

Validus Holdings

  • Ticker: NYSE: VR
  • Industry: Bermuda-based reinsurer
  • Deal terms: 15.2 million shares, $22 per share
  • Lead managers: Goldman Sachs and Merrill Lynch
  • Filed: Jan. 16
  • Opening day: July 25, opened flat, closed at $22.25 -- 1.1% gain
  • Bleacher banter: Priced below its proposed range of $24-$26 per share and sold 400,000 fewer shares than originally planned

Monotype Imaging

  • Ticker: Nasdaq: TYPE
  • Industry: Imaging solutions provider
  • Deal terms: 11 million shares, $12 per share
  • Lead manager: Banc of America
  • Filed: Jan. 26
  • Opening day: July 25, opened flat, closed at $12.05 -- 0.4% gain.
  • Bleacher banter: Priced below its proposed range of $13-$15 per share

ImaRx Therapeutics

  • Ticker: Nasdaq: IMRX
  • Industry: Drug developer
  • Deal terms: 3 million shares, $5 per share
  • Lead manager: Maxim
  • Filed: May 4
  • Opening day: July 26, opened at $4.90, closed at $4.79 -- 4.2% loss.
  • Bleacher banter: Priced at downward revised price point

Voltaire

  • Ticker: Nasdaq: VOLT
  • Industry: Israeli-based server and storage switching services provider
  • Deal terms: 5.8 million shares, $9 per share
  • Lead managers: JP Morgan and Merrill Lynch
  • Filed: July 10
  • Opening day: July 26, opened flat, closed at $8.33 -- 7.4% loss.
  • Bleacher banter: Priced at low end of downward revised range of $9-$11 per share and sold 1.9 million fewer shares than originally planned

Rex Energy

  • Ticker: Nasdaq: REXX
  • Industry: Oil and gas company
  • Deal terms: 14.7 million shares, $11 per share
  • Lead manager: KeyBanc Capital
  • Filed: April 27
  • Opening day: July 25, opened flat, closed at $10.13 -- 7.9% loss
  • Bleacher banter: Priced at low end of its proposed range and sold 5.1 million fewer shares than originally planned

On deck

Amedica

  • Proposed ticker: Nasdaq: AMCA
  • Industry: Orthopedic implant firm
  • Proposed deal terms: 4.7 million shares, $13-$15 per share
  • Lead manager: Morgan Stanley
  • Filed: May 22

Concho Resources

  • Proposed ticker: NYSE: CXO
  • Industry: Oil and natural gas company
  • Proposed deal terms: 21.2 million shares, $14-$16 per share
  • Lead managers: JP Morgan and Banc of America
  • Filed: April 24

Dolan Media

  • Proposed ticker: NYSE: DM
  • Industry: Business services company
  • Proposed deal terms: 10.5 million shares, $13.50-$15.50 per share
  • Lead managers: Goldman Sachs and Merrill Lynch
  • Filed: April 26

Genpact

  • Proposed ticker: NYSE: G
  • Industry: Business services company
  • Proposed deal terms: 35.3 million shares, $16-$18 per share
  • Lead managers: Morgan Stanley, Citigroup, and JP Morgan
  • Filed: April 30

Sucampo Pharmaceuticals

  • Proposed ticker: Nasdaq: SCMP
  • Industry: Drug developer
  • Proposed deal terms: 3.8 million shares, $14-$16 per share
  • Lead manager: Cowen
  • Filed: June 19

Virtusa

  • Proposed ticker: Nasdaq: VRTU
  • Industry: IT services provider
  • Proposed deal terms: 4.4 million shares, $14-$16 per share
  • Lead manager: JP Morgan
  • Filed: April 6

Game of the week
No stars are readily apparent from this week's lineup. Let's take a look at Dolan Media.

Dolan Media is a leading provider of business information and professional services to the legal, financial, and real estate sectors in the United States. The holding company structure was formed in 2003, and the business traces its roots to a predecessor company formed in 1992.

Dolan Media operates through two divisions: business information and professional services. Since 1992, the business information division has completed 38 acquisitions. The professional services division has been built through five acquisitions since 2005. The business information division publishes business journals, court and commercial newspapers, and other publications; operates websites; and conducts a broad range of events for targeted audiences in 20 markets. The professional services division provides services that enable law firms and attorneys to efficiently process residential mortgage defaults and court appeals.

The business information division generates revenue primarily from display and classified advertising, public notices, and subscriptions, while the professional services division generates revenue by providing mortgage default processing and appellate services, primarily through fee-based arrangements. In 2006, the company generated total revenue of $111.6 million, adjusted EBITDA of $28.8 million, and a net loss of $20.3 million. That compares to revenue of $77.9 million, adjusted EBITDA of $13.4 million, and a net loss of $5.7 million for the prior year. In the first quarter of 2007, the company generated total revenue of $35.7 million, adjusted EBITDA of $10.7 million, and a net loss of $27.8 million, compared to revenue of $22.7 million, adjusted EBITDA of $5.8 million, and a net loss of $1.1 million for the comparable period a year ago.

The company attributes its net loss since 2004 to noncash interest expense related to its redeemable preferred stock. That expense will not be incurred after the IPO, because the preferred stock will be redeemed from a portion of the net proceeds. The remaining proceeds will be used to repay debts.

The company believes that the business information industry in this country is highly fragmented and intends to leverage its complementary businesses to take advantage of this.

Shares are expected to begin trading Thursday. 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

  • Cumberland Pharmaceuticals, a specialty pharmaceutical company, announced deal terms of 6.3 million shares at $14-$16 per share. The lead manager is UBS.
  • DemandTec, a retail software provider, announced deal terms of 6 million shares at $10-$12 per share. The lead managers are Morgan Stanley and Credit Suisse.
  • Quicksilver Gas Services, a natural gas processor, announced deal terms of 3.4 million units at $19-$21 per share. The lead managers are UBS and Goldman Sachs.
  • Tully's Coffee, a specialty coffee retailer, announced deal terms of 3.5 million units at $10-$12 per share. The lead manager is KeyBanc Capital.

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

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

Archemix

  • Proposed ticker: Nasdaq: ARCH
  • Industry: Biotech
  • Proposed deal terms: Not yet determined
  • Lead managers: Banc of America and Bear Stearns
  • Filed: July 25

Entropic Communications

  • Proposed ticker: Nasdaq: ENTR
  • Industry: Fabless semiconductor company
  • Proposed deal terms: Not yet determined
  • Lead managers: Credit Suisse and Lehman
  • Filed: July 27

Intcomex

  • Proposed ticker: Nasdaq: ICMX
  • Industry: Latin American IT product distributor
  • Proposed deal terms: Not yet determined
  • Lead manager: Citigroup, UBS, and Banc of America
  • Filed: July 27

K12

  • Proposed ticker: NYSE: LRN
  • Industry: Technology-based education company
  • Proposed deal terms: Not yet determined
  • Lead manager: Morgan Stanley and Credit Suisse
  • Filed: July 27

Maxcom Telecommunications

  • Proposed ticker: Nasdaq: MAXX
  • Industry: Mexican telecom
  • Proposed deal terms: Not yet determined
  • Lead manager: Morgan Stanley
  • Filed: July 23

Success Factors

  • Proposed ticker: NYSE: SUF
  • Industry: Software provider
  • Proposed deal terms: Not yet determined
  • Lead managers: Morgan Stanley and Goldman Sachs
  • Filed: July 20

Talecris Biotherapeutics

  • Proposed ticker: Nasdaq: TLCR
  • Industry: Biotech
  • Proposed deal terms: Not yet determined
  • Lead managers: Morgan Stanley, Goldman Sachs, and JP Morgan
  • Filed: July 20

Trans 1

  • Proposed ticker: Nasdaq: TSON
  • Industry: Medical device maker
  • Proposed deal terms: Not yet determined
  • Lead managers: Lehman and Piper Jaffray
  • Filed: July 24

Pioneer Southwest Energy Partners

  • Proposed ticker: NYSE: PSE
  • Industry: Oil and gas partnership
  • Proposed deal terms: 12.5 million units, price not yet determined
  • Lead managers: Citigroup, Deutsche Bank, and UBS
  • Filed: July 26

WuXi Pharma Tech

  • Proposed ticker: NYSE: WX
  • Industry: Chinese pharmaceutical and biotech outsourcing company
  • Proposed deal terms: 13.2 million American depositary shares, $11-$13 per share
  • Lead managers: Credit Suisse and JP Morgan
  • Filed: July 24

Disabled list

Quark Pharmaceuticals, a drug developer, withdrew its planned offering, citing market conditions.

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

First Solar (Nasdaq: FSLR  )

453.4%

Solar module provider

11/16/06

Riverbed Technology (Nasdaq: RVBD  )

365.5%

Tech

9/20/06

Trina Solar (NYSE: TSL  )

216.1%

Chinese solar module provider

12/18/06

New Oriental Education (NYSE: EDU  )

214%

Chinese educational services

9/6/06

JA Solar (Nasdaq: JASO  )

133.9%

Chinese solar cell provider

2/6/07

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

Netlist (Nasdaq: NLST  )

(63.3%)

Memory device maker

11/29/06

MEDecision (Nasdaq: MEDE  )

(57.1%)

Medical software provider

12/12/06

ACA Capital (NYSE: ACA  )

(52.7%)

Asset manager

11/9/06

Achillion Pharmaceuticals (Nasdaq: ACHN  )

(47.5%)

Drug developer

10/25/06

Catalyst Pharmaceutical (Nasdaq: CPRX  )

(45.7%)

Drug developer

11/7/06

Groupies and fan clubs
If you want to enjoy the action, but don't want to declare your loyalties for specific players, 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.

Equities struck out last week. The Nasdaq's 4.7% drop earned it a bruised first-place finish for the second consecutive week, followed by the 5.6% decline in the First Trust IPOX 100 (AMEX: FPX  ) , an ETF. The IPO Plus Aftermarket (FUND: IPOSX  ) , a mutual fund, fell 5.8%, and the Russell 2000 plunged 7%. 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.

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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