3 IPOs You'll Want to Watch for in 2013: Part 2

The IPO is on the rise. In 2012, the stock market saw more IPOs and raised more money from those IPOs than it did in 2011, despite a slowdown toward the end of the year caused by fiscal cliff fears. Looking forward, prominent venture capitalist Glenn Hutchins told Bloomberg in October that there were still "a lot of companies in the queue" to go public, and Ernst & Young even predicted a thriving year for the IPO in 2013.

So we've got a healthy influx of IPOs ahead of us. Getting familiar with just a few of them now may stop you from impulsively buying any more of those "hot" stocks on trendy advice.

In Part 1, we looked at GoPro, SpaceX, and LivingSocial. From new cloud technologies to renting basements to virtual birds with serious anger management issues, Part 2 examines three more exciting companies that could be going public in 2013.

1. Rovio Entertainment
Absurdly simple, unapologetically ridiculous, and madly addictive, game developer Rovio Entertainment's Angry Birds application hit the piggy bank on the head when it first launched in 2009. Since then, games in the Angry Birds franchise have seen over 1 billion downloads worldwide. 

In 2011, the company saw nearly 10 times ($99 million) the revenue of 2010 ($10 million), and pre-tax margins were sky-high at 64%. The meteoric success even prompted the head of investor relations, Anders Lindeberg, to say back in May that Rovio was "preparing itself" for an IPO. It's only appropriate that investors prepare themselves accordingly, by staying up to date on recent developments in the gaming world.

Despite the extreme popularity of the Angry Birds franchise, Rovio's IPO aspirations may have been damaged by the poor performance of fellow game-developer Zynga (NASDAQ: ZNGA  ) . Actually, "poor performance" is an understatement. A little over a year after going public at $10 per share in December 2011, Zynga shares are worth less than a quarter of that today. 

Potential investors have even more reasons to be wary of another mobile game developer IPO. Glu Mobile (NASDAQ: GLUU  ) is a Zynga-esque equity nightmare as well, going public in 2007 at $11.50 per share. Last Friday the stock closed at $2.31. 

While all this may sound like a nightmare for Rovio -- and it's certainly not great news -- this company has something going for it that Zynga and Glu Mobile do not. A ravenous, devoted fan base, yes, but also a bold vision of the future. Rovio is selling millions of units of merchandise, branding itself as an entertainment company (in the form of a miniature Disney (NYSE: DIS  ) ), and just announced plans for a full-length film in 2016

2. Aerohive Networks
This young enterprise networking company -- should its shares begin trading in 2013 -- could be one of the stronger businesses coming to the markets. Not only is it not afraid to go head-to-head against enterprise technology powerhouses like Cisco Systems (NASDAQ: CSCO  ) and Aruba Networks (NASDAQ: ARUN  ) , it claims to be beating them at their own game. "We have a very high win rate when we compete directly with Cisco or Aruba," Aerohive CEO David Flynn said in a September interview with VentureBeat. Flynn went on to say that equity funding was necessary to continue "getting those at-bats."

Again, we find that a potential threat to this IPO is merely guilt by association. Cloud-based 2012 IPOs ServiceNow (NYSE: NOW  ) and Workday (NYSE: WDAY  ) , while both advancing since going public, aren't even profitable yet. Both also have lowly one-star ratings on Motley Fool CAPS. Current investors are simply banking that it's only a matter of time before these companies eke out some earnings. Thankfully, just because these two aren't raking in the dough yet, that doesn't mean Aerohive's stock will be dead on arrival.

The fact is, this segment of the market can support a lot of growth right now. Workday grew revenue from $25 million in 2009 to $134 million in 2012. ServiceNow grew from under $20 million in sales in 2009 to over $90 million in 2011. And Aerohive has said that its own revenue is "more than doubling" each year. I'd say that's not a bad market to be a player in.

3. Airbnb
Talk about solving an ancient problem in a novel way. The problem: shelter. The solution: live with a stranger. Airbnb, which was tapped by Goldman Sachs (NYSE: GS  ) a year ago as one of the 40-plus companies most likely to go public, is a website where people can rent out spare rooms to tourists, people in search of a permanent residence, and other assorted passers-through. 

Only four years young, Airbnb is already fighting competition from public companies. Less than three weeks after real-estate information site Zillow (NASDAQ: Z  ) bought the rental search site HotPads last month, Airbnb made an acquisition of its own. Airbnb scooped up Localmind, which is a service that connects travelers with questions to locals with answers. It's a strategic move that aims to immerse the traveler in their community -- and, of course, differentiate Airbnb's services.

IPO uh-oh
Zynga's post-IPO performance has been dreadful, and investors are beginning to wonder if it's "game over" for this newly public company. Being so closely tied to the world's largest social network can be a blessing and a curse. You can learn everything you need to know about Zynga and whether it's a buy or a sell in our new premium research report. Don't even think about picking up shares before you read what our top analysts have to say about Zynga. Click here to access your copy.


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  • Report this Comment On January 02, 2013, at 11:54 AM, bikAA wrote:

    Why don't you just print your articles here instead of forcing people to give you their email address? It just makes people wary of you and then when you share the email with third party advertisers we get tons of junk mail. Your analyses are very good, and so we read them and come back for more, and look at the ads you have on your web pages, but when you force, I mean force us to give up our private email you are really going over the line. Just sayin..... :)

  • Report this Comment On September 15, 2013, at 7:30 AM, teachulesson wrote:

    Cisco acquired Aerohive competitor Meraki for $1.28B in Nov. 2012, that's means Aerohive missed a good opportunity to exit. The investor had spent more than $200 million so far, they want to find a way to exit ASAP, the IPO seems can not happen in 2013 since there are only 3 months left.

    Aerohive management team turnover rate is high-- at least 1 executive leave or forced to leave each year.

    The company's reputation is also questionable, one of the San Francisco based lawyer helped 3 Aerohive ex-employees filing litigation against the company during the past 4 years.

    No company would like to acquire Aerohive for the above risks, IPO is their only way out. But tough.

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