In terms of initial public offerings, February of this year is going to go out with more a whimper than a growl. It's almost as if the tough winter decided to take a bite of the market, leaving only a few issues to chew over. True to recent form, the first stock on this week's deck is a health-care related issue, Lumenis.
Untrue to form, the second and third (Varonis Systems and 2U) are from the world of tech, a sector that's been notably absent on the IPO market in the recent past. According to data compiled by Renaissance Capital, only around 14% of total proceeds from new issues in 2013 derived from tech stocks, compared with almost 50% the previous year.
Especially in light of the often-rocky history of new tech and health-care stocks, we have to warn that IPO investing carries above-average risk. This is because initial stock prices can be far from the value the market eventually puts on the company's shares. Of course, this situation provides immense upside potential ... though it also presents the chance of losing a big chunk of an investment.
OK, enough of the statistics and the caution. On to this week's candidates.
This Israeli-based company concentrates on the manufacture and sale of laser-based systems used for various surgical procedures. Its product mix is sorted into three categories -- surgical, ophthalmic, and aesthetic. Over the past five financial years, the company's top line has grown steadily if not spectacularly, while its net has been consistently in the black. In its literature, Lumenis says it believes it is "uniquely positioned to outpace market growth and expand our addressable markets by leveraging our innovative technology, extensive product pipeline, and established global sales and service infrastructure." We'll soon see if the market agrees.
Lumenis at least has some financial muscle behind its IPO. Goldman Sachs (NYSE:GS), Credit Suisse, and Leucadia's Jefferies are the underwriting syndicate. A total of 6.25 million shares will hit the market at a price of $15 to $17 apiece on Thursday, with the stock anticipated to be listed on the Nasdaq under the ticker symbol LMNS.
This company wants to get your business organized. In its words, anchored by its signature DatAdvantage solution, Varonis "provide[s] an innovative software platform that allows enterprises to map, analyze, manage, and migrate their unstructured data." That sales pitch seems to have resonated at Philip Morris International (NYSE:PM), Juniper Networks (NYSE:JNPR), and Isis Pharmaceuticals (NASDAQ:IONS), all of which are clients and have written positive testimonials about Varonis' products. Revenues nearly doubled to $74.6 million across the 2011 to 2013 fiscal years, although the company remains (slightly) in the red. With a capital boost from its share issue, maybe it can snag more top level clients and swing to profitability.
Varonis is being brought to market by Morgan Stanley (NYSE:MS), Barclays, Royal Bank of Canada's RBC Capital Markets, and this week's busiest underwriter, Jefferies. A totla of 4.8 million shares will go on sale Friday for $17 to $19 per share, and the company hopes to list on the Nasdaq under the ticker symbol VRNS.
A fresh IPO filing comes from this tech concern, which wins this week's award, hands down, for shortest company name. 2U focuses exclusively on the higher-education market; its service-as-a-software platform allows colleges and universities to deliver their offerings online to students around the world. It's already signed up top academic names such as the University of Southern California and Georgetown, and it cites a Department of Education growth estimate of 14% for post-secondary degree enrollments by 2021. Like Varonis, though, torrid top-line growth has not yet been matched recently by profitability on the bottom line.
The lead underwriters of 2U's IPO will be Goldman Sachs and Credit Suisse, and it'll be a substantial issue -- the company has filed to raise up to $100 million. The IPO date should be nailed down in the near future, while the company plans to list on the Nasdaq under the ticker symbol TWOU.