The U.S. IPO market is pretty much dried up. In 2008, a total of 43 companies went public, only 8 in the second half of the year, according to a report from Renaissance Capital, as the crisis in the financial market forced companies abandon plans to go public. So far in 2009, only 2 initial offerings were listed on U.S. exchanges, Mead Johnson Nutrition (MJN) and Changyou.com (CYOU).
After a slow start in the first quarter, April is the first busy month in 2009 for the U.S. IPO market with three more offerings in the pipeline, two this week: Rosetta Stone (RST) and Bridgepoint Education (BPI).
Even if you are not familiar with Rosetta Stone the company itself, the chance that you have heard “the easiest way to learn a foreign language” commercial is still pretty high. Rosetta Stone’s self-study products have been used not only by college students and working professionals, but also by people working for NASA, the U.S. Army and Peace Corps to learn foreign languages.
Founded in 1992, Rosetta Stone has seen rapid growth in sales since 2003 after spending aggressivly in marketing and distribution. According to IPOHome.com, Rosetta Stone’s earnings have grown more than 50% in both 2007 and 2008 while increasing operating margins from 6% to 14%. However, the firm, despite its strong growth perspective, has its vulnerability. As IPOHome.com indicates in its report:
Rosetta Stone is highly exposed to discretionary consumer spending, which makes up 80% of sales, and it may still be hit by the global recession, especially given the minimum $219 price point of its products.
That being said, Rosetta Stone could still benefit from a market that hasn’t seen many quality offerings lately. And it may even take a cue from two early 2009 IPOs, both of which have gone up nicely since their respective debuts, MJN +10% and CYOU +75%.
Rosetta Stone plans to offer 6.25 million shares, priced between $15 to $17. The stock will be traded on NYSE on April 16th under the symbol RST.
In addition to RST, another IPO on deck this week is Bridgepoint Education. Founded in 2004, the San Diego, CA based online higher education provider offers programs for BA, MA and PhD degrees in business, education, psychology, social sciences and health sciences. According to an article on The Wall Street Journal, Bridgepoint:
generated more than twice the revenue and eight times the earnings in 2008 versus 2007, ending the year with $26.4 million in profits. It has more students, faster enrollment growth and a higher operating profit margin, at 15%, than the last online college that went public, Grand Canyon Education Inc.
Shares of Grand Canyon Education (LOPE), which was the last IPO in 2008, have gained nearly 25% since going public on November 19.
BPI plans to offer 13.5 million shares in the IPO with price between $14 and $16 apiece. The stock will be traded under the symbol BPI on the NYSE.