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 the 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: Dolan Media

  • Ticker: NYSE: DM
  • Industry: Business services company
  • Deal terms: 13.5 million shares, $14.50 per share
  • Lead managers: Goldman Sachs and Merrill Lynch
  • Filed: April 26
  • Opening day: Aug. 2, opened at $16.40, closed at $17.72, 22.2% gain.
  • Bleacher banter: Priced at midpoint of its proposed range and sold 3 million more shares than planned.

Genpact

  • Ticker: NYSE: G
  • Industry: Business services company
  • Deal terms: 35.3 million shares, $14 per share
  • Lead managers: Morgan Stanley, Citigroup, and JPMorgan
  • Filed: April 30
  • Opening day: Aug. 2, opened flat, closed at $16.75, 19.6% gain.
  • Bleacher banter: Priced below its proposed range of $16-$18 per share.

Concho Resources

  • Ticker: NYSE: CXO
  • Industry: Oil and natural-gas company
  • Deal terms: 20.9 million shares, $11.50 per share
  • Lead managers: JP Morgan and Banc of America
  • Filed: April 24
  • Opening day: Aug. 3, opened at $11.61, closed at $12.90, 12.2% gain.
  • Bleacher banter: Priced below its proposed range of $14-$16 per share and sold 300,000 fewer secondary shares than planned.

Sucampo Pharmaceuticals

  • Ticker: Nasdaq: SCMP
  • Industry: Drug developer
  • Deal terms: 3.8 million shares, $11.50 per share
  • Lead manager: Cowen
  • Filed: June 19
  • Opening day: Aug. 2, opened at $11.50, closed at $12.26, 6.6% gain.
  • Bleacher banter: Priced below its proposed range of $14-$16 per share.

Loser: Virtusa

  • Ticker: Nasdaq: VRTU
  • Industry: IT services provider
  • Deal terms: 4.4 million shares, $14 per share
  • Lead manager: JP Morgan
  • Filed: April 6
  • Opening day: Aug. 3, opened at $13.50, closed at $11.86, 15.3% loss.
  • Bleacher banter: Priced at low end of its proposed range.

On deck

Cross Match Technologies

  • Proposed ticker: Nasdaq: CROS
  • Industry: Biometrics provider
  • Proposed deal terms: 11.8 million shares, $14-$16 per share
  • Lead manager: Credit Suisse
  • Filed: April 30

Cumberland Pharmaceuticals

  • Proposed ticker: Nasdaq: CPIX
  • Industry: Specialty pharmaceutical
  • Proposed deal terms: 6.3 million shares, $14-$16 per share
  • Lead manager: UBS
  • Filed: May 1

DemandTec

  • Proposed ticker: Nasdaq: DMAN
  • Industry: Retail software provider
  • Proposed deal terms: 6 million shares, $10-$12 per share
  • Lead managers: Morgan Stanley and Credit Suisse
  • Filed: May 24

E-House (China) Holdings

  • Proposed ticker: NYSE: EJ
  • Industry: Chinese real estate firm
  • Proposed deal terms: 14.6 million shares, $11.50-$13.50 per share
  • Lead managers: Credit Suisse and Merrill Lynch
  • Filed: July 10

HireRight

  • Proposed ticker: Nasdaq: HIRE
  • Industry: Employment screening software provider
  • Proposed deal terms: 4.4 million shares, $15-$17 per share
  • Lead manager: Credit Suisse
  • Filed: Feb. 12

Horsehead Holding

  • Proposed ticker: Nasdaq: ZINC
  • Industry: Zinc producer
  • Proposed deal terms: 5.6 million shares, $18-$20 per share
  • Lead manager: Friedman Billings
  • Filed: July 20

Masimo

  • Proposed ticker: Nasdaq: MASI
  • Industry: Medical device maker
  • Proposed deal terms: 11.9 million shares, $16-$18 per share
  • Lead managers: Piper Jaffray, Deutsche Bank, and Citigroup
  • Filed: April 17

MercadoLibre

  • Proposed ticker: Nasdaq: MELI
  • Industry: Latin American trading platform
  • Proposed deal terms: 16.1 million shares, $16-$18 per share
  • Lead manager: JPMorgan and Merrill Lynch
  • Filed: May 11

NanoDynamics

  • Proposed ticker: Nasdaq: NDMX
  • Industry: Clean energy firm
  • Proposed deal terms: 6.6 million shares, $12-$14 per share
  • Lead manager: Jefferies
  • Filed: May 4

Paragon Shipping

  • Proposed ticker: Nasdaq: PRGN
  • Industry: Drybulk shipping provider
  • Proposed deal terms: 10.3 million shares, $16-$18 per share
  • Lead managers: UBS and Morgan Stanley
  • Filed: July 19

Quicksilver Gas Services

  • Proposed ticker: NYSE: KGS
  • Industry: Natural-gas processor
  • Proposed deal terms: 5 million shares, $19-$21 per share
  • Lead managers: UBS and Goldman Sachs
  • Filed: Feb. 12

Tully's Coffee

  • Proposed ticker: Nasdaq: TULY
  • Industry: Specialty coffee retailer
  • Proposed deal terms: 3.5 million shares, $10-$12 per share
  • Lead managers: KeyBanc Capital
  • Filed: April 27

WuXi Pharma Tech

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

Game of the week
While this country's housing market is in disarray, do you have the fortitude to invest in China's?

E-House (China) Holdings is a Cayman Islands-organized holding company that traces its operating history to 2000. Through its subsidiaries, the company has become China's largest real estate agency and consulting-services company.

E-House sold an aggregate of approximately 5 million square meters of primary properties with a transaction value of approximately $5.4 billion from 2001 to 2006. The company operates through a network of more than 1,800 real estate sales professionals in 20 cities throughout China. E-House takes pride in its proprietary real estate information database and analysis system, which it believes is the only information system providing up-to-date, comprehensive, and in-depth information about residential and commercial real estate properties in all major regions in China. Clients include leading domestic and international real estate developers.

The company recorded $56.0 million in revenues and $18.2 million in net income in 2006, compared with $38.7 million in revenues and $11.1 million in net income for the prior year. For the three-month period ended in March, the company earned $16.0 million in revenues and $4.4 million in net income, compared with $4.0 million in revenues and a $1.3 million loss for the same period a year ago. From 2004 to 2006, revenues grew at a 34% compound annual growth rate, while net income produced an 80% compound annual growth rate.

E-House believes that the real estate market in China is fragmented and the overall real estate consulting market is at an early stage of development. The company intends to grow its business and expand its geographic reach and service offerings. Net proceeds from the offering will be used to fund capital expenditures, including investing in the company's information and operational systems, and for general corporate purposes.

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

  • CCS Medical, a medical-supplies distributor, announced deal terms of 10 million shares at $14-$16 per share. The lead managers are Lehman and Goldman Sachs.
  • Cosan, a Brazilian sugar and ethanol producer, announced deal terms of 100 million shares at a price equivalent to the closing price of the stock on the Sao Paolo Stock Exchange. The deal is expected to price on Aug. 15, and the lead managers are Credit Suisse, Goldman Sachs, and Morgan Stanley.

Sent down to the minors

  • Amedica, an orthopedic-implant firm, postponed its offering slated for last week, citing market conditions.

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

Accoona

  • Proposed ticker: Nasdaq: ACNA
  • Industry: Internet company
  • Proposed deal terms: Not yet determined
  • Lead manager: Maxim Group
  • Filed: Aug.3

CDM Resource Partners

  • Proposed ticker: NYSE: CDM
  • Industry: Natural gas services
  • Proposed deal terms: 7 million shares, price not yet determined
  • Lead managers: Lehman and Merrill Lynch
  • Filed: July 31

MSCI

  • Proposed ticker: Nasdaq: MSCI
  • Industry: Investment analytics tool provider
  • Proposed deal terms: Not yet determined
  • Lead manager: Morgan Stanley
  • Filed: July 31

Synacor

  • Proposed ticker: Nasdaq: SYNC
  • Industry: Internet services provider
  • Proposed deal terms: Not yet determined
  • Lead managers: Deutsche Bank and Bear Stearns
  • Filed: Aug.2

Disabled list
No planned offerings were withdrawn last week.

Champions
Meet our current champs. 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

Return

Description

IPO Date

First Solar (Nasdaq: FSLR  )

400.3%

Solar module provider

11/16/06

Riverbed Technology (Nasdaq: RVBD  )

328.6%

Tech

9/20/06

New Oriental Education (NYSE: EDU  )

238.3%

Chinese educational-services provider

9/6/06

Trina Solar (NYSE: TSL  )

185.4%

Chinese solar-module provider

12/18/06

Mindray Medical (NYSE: MR  )

134.3%

Chinese medical-device maker

9/25/06

Benchwarmers
Now meet our current 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

Return

Description

IPO Date

Netlist

(72.9%)

Memory-device maker

11/29/06

Optium (Nasdaq: OPTM  )

(59.1%)

Fiber-optic components provider

10/26/06

MEDecision

(57.3%)

Medical-software provider

12/12/06

CBRE Realty Finance (NYSE: CBF  )

(51.1%)

Specialty-finance REIT

9/27/06

Molecular Insight Pharmaceuticals (Nasdaq: MIPI  )

(49.9%)

Biotech

2/1/07

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.

Equities struck out again last week because of widening credit concerns. The IPO Plus Aftermarket (FUND: IPOSX  ) , a mutual fund, escaped with a mere 0.3% slip, while fellow IPO player First Trust IPOX 100 (AMEX: FPX  ) , an ETF, fell 2.4%. The Nasdaq dropped 2% and the Russell 2000 declined 2.9%. 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 recommendation. Mindray Medical is a Rule Breakers 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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