As far as the market for fresh stock issues is concerned, March is definitely not going out like a lamb. This week the IPO beast will roar loudly, with nine new stocks coming to market. Out of that group, one -- IMS Health Holdings -- will tip the scales, pricing its issue to take in a potential $1.37 billion.
Aside from that big animal, this week will see the market debut of online food delivery service provider GrubHub, which we've written about previously in a longer analysis.
Before we discuss these issues (as well as IT cloud services niche firms Five9 and The Rubicon Project), we have to wag a cautionary finger: IPO investing carries above-average risk, since initial stock prices can be far from the value the market eventually puts on the company's shares. This situation provides immense upside potential, but it also opens the possibility of losing a big chunk of an investment.
With that warning out of the way, let's dig in.
The Rubicon Project
At the dawn of the millennium, the bulk of tech industry IPOs were from companies somehow connected to the sale of goods or services on the Internet. Fast-forward a decade and a half later to the latest trend -- cloud computing service providers. The Rubicon Project provides a virtual marketplace for digital advertising. It promises efficiency in doing so; in its words it has "transformed the cumbersome, complex process of buying and selling digital advertising into a seamless automated process that optimizes results for both buyers and sellers." Revenue is advancing at encouraging rates, although the firm has booked net losses in each of its past three fiscal years.
Lead-underwriting this IPO are Morgan Stanley (MS 1.60%), Goldman Sachs (GS 0.72%) and Royal Bank of Canada's (RY 1.00%) RBC Capital Markets. Nearly 6.8 million shares of The Rubicon Project are slated to go on sale at $15 to $17 apiece Wednesday, trading on the New York Stock Exchange and bearing the ticker symbol RUBI.
For investors who can't get enough cloud this week, there's Five9. As with The Rubicon Project, the fluffy part of cyberspace is from whence this firm delivers its wares. Five9's niche is contact centers -- i.e., customers' first point of contact with a company and its services. Five9 provides its offerings through its Virtual Contact Center, a software suite packaging a host of functions needed to implement and run such operations. The company seems to be doing a good job of capturing its segment, with sharply rising revenues, but potential investors should keep an eye on growing bottom-line losses.
Ten million shares of Five9 are scheduled to hit the market on Friday at a price of $9 to $11 apiece, trading on the Nasdaq under the ticker symbol FIVN. The lead underwriters of the issue are JPMorgan Chase (JPM 0.20%) unit J.P. Morgan, Barclays, and Bank of America Merrill Lynch.
IMS Health Holdings
By far the biggest issue of the week belongs to this company, another niche tech concern. IMS Health Holdings is a purveyor of information to the broader health care industry, and it's got reams of data -- according to the company, it's in possession of more than 500 million anonymous patient records comprising more than 10 petabytes of data. Its client base is pharmaceutical companies and other health-care firms that require such data sets for their research. Since assuming its present corporate form starting with the 2010 fiscal year, IMS Health Holdings has shown good profitability and an incrementally growing top line. Health care is a strong industry and will likely continue to be, so IMS Health Holdings seems like a good play on that growth.
J.P. Morgan, Goldman Sachs, and Morgan Stanley are the lead underwriters bringing IMS Health Holdings public. A total of 65 million shares should go on sale this Friday on the NYSE at $18 to $21 per share under the ticker symbol IMS.
If any of this week's issues is familiar to the general public it's probably this one, a purveyor of online food ordering services with a strong presence on mobile devices thanks to its popular apps. Middle-manning food has been lucrative for GrubHub, although its rising costs have dampened profitability over the past three years. Another area of concern is the size of the issue, which gives GrubHub's stock very high valuations. Nevertheless, the restaurant business is poised to grow and the firm seems to be in a good position to take advantage of this.
GrubHub is scheduled to make its market debut on the NYSE Friday under the auspices of lead underwriters Citigroup (C 1.61%) and Morgan Stanley. The company is selling 4 million shares, while other stakeholders are unloading a total of just over 3 million. The price range is currently $20 to $22 per share, and the stock's ticker symbol should be the very appropriate GRUB.