IPO Overview: High Volume, Weak Performance

by: Renaissance Capital IPO Research

The IPO market gained back some ground last week with seven completed deals and three postponements, a slight improvement from last week, during which fluctuations in the broader markets resulted in four postponements and two IPO pricings. Though deal flow has remained high with nine priced IPOs so far this month (compared with three deals during the entire month of May 2009), investors have exhibited extreme price sensitivity and all nine priced below the midpoints of their initial ranges.

TeleNav (NASDAQ:TNAV), a leading provider of location-based services for mobile devices including carrier-branded applications by Sprint (NYSE:S) and AT&T (NYSE:T), emerged as the week's winner and one of only two IPOs to post a positive return. After pricing 7 million shares at $8, well below its initial $11-$13 range, TeleNav saw its stock jump 23% in its debut as investors responded to the company's impressive financials and heavily discounted IPO price. TeleNav has benefited from its scalable, web-based platform and posted $122 million in sales for the nine months ended March 31st, up 59% from the year-ago period.

Express (NYSE:EXPR) was another deal that was watched closely by investors as the first apparel retail IPO since rue21 (NASDAQ:RUE) went public last November. After pricing its 16 million shares at $17, below the $18-$20 range, the former division of Limited Brands saw its shares fall nearly -1% in its first day of trading and an additional -5% in the aftermarket. As a turnaround company reemerging from previous years of mismanagement and fashion misses, Express may have had difficulties convincing investors of the strength of its brand and its ability to compete with fast-fashion stores such as Forever21 and H&M in the longer term.

This week's three other US-based companies to go public were vertically-integrated aluminum products provider Noranda Aluminum (NOR), natural gas operator Niska Gas Storage Partners (NYSE:NKA) and leading non-asset based transportation and logistics services provider Roadrunner Transportation Systems (NYSE:RRTS). Of the three, Noranda Aluminum posted the highest return and is up 10% from its IPO price; however, the company was forced to slash its deal size from $250 million to $80 million and lower its price to $8 from a range of $14-$16 before coming to market.

The remaining two IPOs of last week's crop, JinkoSolar (NYSE:JKS) and (NASDAQ:KONE), were both China-based companies that began trading on Friday. Their stocks were flat and down -2%, respectively, by the end of the week. The two postponements were also Chinese deals: telecom reseller Wave2Wave (WAV) and MIE Holdings (NYSE:MIE), an E&P company that pushed its pricing date back from last week. There have been 18 IPO postponements or withdrawals year-to-date.

Looking ahead, there are only three deals on the IPO calendar for the rest of May as companies wait for a more favorable market environment to raise capital. Online marketing services provider ReachLocal (NASDAQ:RLOC) and hospital-focused revenue cycle manager Accretive Health (AH) are scheduled for next week and radiation detection company Mirion Technologies (MION) is set for the following week. However, IPO filing activity remains high with eleven initial submissions so far this week (compared with three during the entire month of May 2009) and TeleNav's success indicates the right company can post a strong performance at the right price despite shakiness in the overall market.

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