The IPO Review

According to Renaissance Capital's IPOHome.com website, 2006 has been a decent year for IPOs. There were 198 total deals raising a total of $43 billion and returning 23% to investors so far. Although that's impressive, it's still dwarfed by the go-go years of 1999 and 2000, each of which had more than 400 IPOs raising more than double the total proceeds of 2006. But it's also a good deal better than 2001-2003, in the aftermath of the bubble, when just a little more than 200 deals were done in total.

Though 2006 had its fair share of duds, some IPOs registered big gains, including Home Inns & Hotel Management, up 155% since it went public in October, Riverbed Technology, up 226% since its IPO in September, and Omrix Biopharmaceuticals, which has returned 219% in its eight months as a public company.

With 2007 right around the corner, it's questionable whether the market can match or potentially beat its performance in '06. But before we put the cart before the horse, here's a quick look back at a few of the IPOs that closed out 2006 and what our Motley Fool CAPS community has thought of them so far.

Though a few of these recent IPOs have amassed enough CAPS votes to get a CAPS rating, most of them still need more players to weigh in before they earn any stars.

Steeling a peek at Claymont
While custom discrete steel plates may not make for an exciting IPO, Claymont Steel is certainly hoping that some investors will take notice of an industry where customers have voted it tops for a number of years. The company is a minimill that specializes in custom steel plates and, in particular, on smaller-quantity orders with short lead times and non-standard dimensions. This specialty allows Claymont to differentiate from the more commoditized vendors and to claim higher margins on its products. Claymont is far from alone in this niche, though, and it has to compete head-to-head with both Oregon Steel out West and the behemoth Mittal Steel.

Though private-equity buyer H.I.G. Capital had just bought Claymont in April 2005, the valuation at the IPO gave H.I.G. a nice win on its $105.5 million original investment. And the seven CAPS players who have given Claymont the thumbs-up so far seem to think there's still more good news ahead. After strong margin improvements in 2004 and 2005, margins for the first nine months of 2006 are slightly down, but the stock is also trading at only 5.4 times annualized, pro forma 2006 earnings per share. Why not go ahead and weigh in on Claymont yourself?

Smile for Artes
Worried about those nasty smile lines? Well, if you haven't found your fix from one of the other solutions floating around out there -- like, say, Allergan's Botox -- Artes Medical may have what you're looking for. The company manufactures an FDA-approved injectable implant called ArteFill, which props up sagging skin at wrinkle lines by using a combination of bovine collagen from calf hides and polymethylmethacrylate (PMMA) microspheres, an implantable material that is not absorbed or degraded in the human body. And because PMMA is durable within the body, Artes believes that its restorative products will outlast many of the other available treatments.

The plan for Artes is simple: Get the word out on ArteFill, educate doctors, and let everyone know why this is the ideal injectable aesthetic treatment. Investors who have pushed the stock up since the IPO seem to believe the story that the numbers don't tell, as the company has yet to actually sell anything -- besides stock, of course. There's no doubt about the attractiveness of the market Artes is going after, though, and according to its IPO prospectus, sales are expected to begin in the first quarter of 2007. Check out Artes on CAPS.

Not a solar stick-in-the-mud
Right from the get-go, Solarfun Power Holdings makes no mystery of its mission -- its prospectus begins with a picture captioned "Make the Earth Cleaner." The question, though, is whether a Chinese company in the increasingly competitive field of photovoltaic (PV) cells, which just established itself in 2004 and started making products in late 2005 is really ready to be a public company. Fellow China-based PV manufacturer Suntech Power Holdings serves as a great example of what could lie ahead for Solarfun if things work out, since Suntech stock is up substantially from its IPO and has posted nice financials as a public company. But even Suntech was a bit more mature when it came to market in late 2005.

Looking at the blazing growth that Suntech has posted, investors have to wonder whether Solarfun's current trading multiple of 96 times annualized 2006 EPS is exceedingly high, or just temporarily inflated as the company prepares to double or triple in the coming year. Judging by the 20% that got carved out of the stock on the first day of trading, investors do have their misgivings, but since that bad opening, the stock has come back up a bit. Let the CAPS community know what you think of Solarfun.

In the next few weeks, we'll start to see the beginnings of what 2007's IPO market has to offer. There are no promises that next year will be able to outshine, or even match, this year, but what you can count on is being able to tune in to the Motley Fool's CAPS community to get fresh thoughts on these stock-market newcomers. So if you're already one of the 18,600 players already in the game, be sure to check out a few of the IPOs above, and if you're not a CAPS member yet -- can you say "New Year's resolution?"

Quick, before 2007 rolls in!

• And the Worst Stock for 2007 Is &
• 2006 in Review and 2007 Preview

Omrix and Suntech are Motley Fool Rule Breakers recommendations. For more coverage of the market's best growth stocks, check out Rule Breakers free for 30 days.

Fool contributor Matt Koppenheffer holds shares of Suntech. He does not own shares of any of the other companies mentioned. The Fool's disclosure policy is always a promising offering.