Wall Street's Forgotten IPO

Why did QuinStreet (Nasdaq: QNST  ) cross the IPO road? To get pummeled on the other side.

You can't get any more nondescript than the online direct marketer's Wall Street debut yesterday. The shares were priced at $15, opened at $15, and closed at $15.

Sure, QuinStreet may have traded as high as $15.55 yesterday morning, but that's a far cry from the gilded days when a fast-growing dot-com would be off to the races. Given the market's bearish bent today, QuinStreet is also officially a busted IPO, after trading as low as $14.30 this morning.

QuinStreet wanted to sell 10 million shares at $17 to $19 apiece, but had to shave its price down to $15 to find enough IPO buyers.

That's just not right. QuinStreet may not be a household name, but the company is backed by pedigreed investment banker Frank Quattrone. It's also growing nicely, having cranked out several profitable years in a row.

Revenue through the first six months of fiscal 2010 rose 27%, with earnings climbing twice as fast. Even in fiscal 2008, when earnings growth took a breather, QuinStreet still managed to grow its top line 15% during a very challenging year for the advertising industry.

You probably don't know QuinStreet, because most of its work is done behind the scenes. It specializes in vertical marketing, giving sponsors an advertising platform to reach Internet users in targeted age, income, or life event brackets. Clients appreciate this sort of deep dive.

QuinStreet isn't small by dot-com standards. It rang up net income of $17.2 million on $260.5 million in revenue last year. Unfortunately, it just happened to have lousy timing for its debutante dance.

Just two of the six stocks that braved the IPO waters last month are trading higher these days.

Company

IPO Price

Feb. 11, 2010 Price

China Electric Motor (Nasdaq: CELM  )

$4.50

$4.75

IFM Investments (NYSE: CTC  )

$7.00

$7.00

Andatee China Marine (Nasdaq: AMCF  )

$6.30

$5.84

China Hydroelectric (NYSE: CHC  )

$16.00

$10.28

Symetra Financial (NYSE: SYA  )

$12.00

$12.82

Cellu Tissue (NYSE: CLU  )

$13.00

$11.41

Given the uninspiring performances of fresh listings -- QuinStreet included -- it's no surprise to see prospective IPOs pulling their offerings.

This is also an opportunity for individual investors who don't have the kind of financial pull to grab shares from lead underwriters initially. Busted IPOs aren't necessarily stinkers. QuinStreet is a well-positioned Internet workhorse. Investors today can buy in for less than the company thought it was worth last month, and less than what underwriters thought it was worth this week.

In short, IPO pain is a cherry-picking investor's gain.

Do you own any stocks that have gone public in 2010? Tell us all about it in the comment box below.

Longtime Fool contributor Rick Munarriz is glad to see the IPO spigot flowing again. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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