The IPO market would like 2012 to be over. It wants to forget about the whole Facebook (Nasdaq: FB) issue. With investors on the run and a general flee from equities, the IPO market is trying to tell the world, "Hey, we're here for a reason, guys! Pay attention to us!" Keep in mind, this is coming from someone who labels himself a devout value investor: It's not all bad. A lot of it is, but it's not all bad. And Friday's IPOs prove that.
IPO saviors
It's easy to understand why the IPO market gets a bad rap. The trading firms might buy a hundred thousand shares, but then turn around and sell them three seconds later. As for actual investors, I don't know too many people who buy on day one anymore; it just seems like investor suicide.
All of that said, I take a certain degree of relief from the fact that two IPOs from companies with concrete business models and talented management are flying high right out of the gate.
The first is Kayak Software (Nasdaq: KYAK). Kayak needs little introduction, as you probably used it to book your Thanksgiving flight to the in-laws in Missoula, ugh. The travel site aggregator is founded and led by people who are familiar with the business:
- Steve Hafner, former co-founder of Orbitz.
- Greg Slyngstad, former co-founder of Expedia.
- Terrell Jones, former founder of Travelocity.
It's kind of a ridiculous lineup of founders. It's as if you wanted to create the world's coolest person, so you somehow spliced the genes of George Clooney, Clint Eastwood, and Dean Martin. Can you imagine how much that guy could drink?
Anyway, the company's revenues are on the rise, gaining 39% year over year. In a rare moment of things going the way they should, Kayak CEO Hafner said, "The IPO went exactly as I planned." Cheers to you, Steve.
A fitting name
The valley is synonymous with start-ups and all things techy. So it makes sense that this successful software company is called Palo Alto Networks (NYSE: PANW). While Kayak is a tech company, it's removed from the tech mecca (tecca?) and instead resides in Norwalk, Conn. So Palo Alto Networks really is the biggest Silicon Valley IPO to come after the disaster that was Facebook.
In its first day of trading, Palo Alto skyrocketed nearly 50% before backing down to a still-impressive 33% one-day gain. The company is known for its enterprise level firewall technology. The company's current CEO is former VeriSign leader Mark McLaughlin.
The company has yet to turn an annual profit, but it looks like its time has come. For the last three years, revenues rose from $13.4 million to $48.8 million, and then to $118.6 million last fiscal year. While the fiscal 2012 year is not yet over for the company, the first nine months show around $180 million in revenues.
To IPO or no
With Facebook's stock still lingering about 23% below its day one price, these companies look to be succeeding. I wouldn't go as far as to say the IPO market has turned around -- that question is definitely still up in the air. And, to credit Facebook, it's a newborn on the public markets. When the company delivers its first earnings report on Thursday, it'll be interesting to see what has transpired over the past three months. I have spoken openly about my distaste for Facebook as a stock, but I am always open to having my mind changed.
In the meantime, though, I am paying attention to the companies mentioned here, which are raking in dough and treating shareholders the way they were meant to be treated -- as part owners of the business.
As for another recent tech IPO, our analysts think this company is far more deserving of your investment fund than Facebook. In this free report, find out what the company is and why we think it's one of the best recent IPOs .
