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October was another great performance month; the average gain in the IPO Candy Ecosystem was 9% for the month and 4% for the last 2 weeks. There were another 11 deals priced and 12 new filings in the last two weeks. There are about 15 deals in active marketing.

The hunger for Chinese-flavored deals continues with success for TAL Education (XRS, K-12 tutoring), Mecox Lane (MCOX, online retail platform) and Le Gaga (GAGA, greenhouse vegetables).

There were quite a few solid domestic deals as well. Two we are following are NetSpend (NASDAQ:NTSP) in FinTech and Pacific Biosciences (NASDAQ:PACB) in HealthTech. We’re particularly interested in Pacific Biosciences because we find the intersection of IT and biology to be a fascinating space. Two good deals we liked but were outside of our coverage areas were Vera Bradley (NASDAQ:VRA), and Bravo Brio Restaurants (NASDAQ:BBRG). There were also several less interesting transactions well outside of our areas of interest that were priced including Aegerion Pharmaceuticals (NASDAQ:AEGR), ExamWorks (NYSE:EXAM) and SeaCube Container Leasing (Pending:BOX).

One deal, SeaCube, was priced at a deep discount: $10 versus the $16-18 filing range. First Wind Holdings withdrew their IPO based on what they (or at least their major backers, D.E. Shaw and Madison Dearborn) felt was likely to be a too-low price after it appeared that they would only be able to price below the already-revised-down range.

The IPO market continues to be fairly broad and deep to support a wide range of deals. That trend continues in the diversity of the recent filings. These include firms in semiconductors, cruise lines, real estate, education, banking, and network services, to name a few.

Performance

October made for two back-to-back good months for the IPO market, with an average gain of 9% for the month that brings the average 3-month gain up to 18%. Top performers for the month included Motricity (MOTR +83%), GenMark Diagnostics (GNMK +46%), IntraLinks (IL +29%) and Envestnet (ENV +26%).

We’ve commented on most of these companies recently, but GenMark Diagnostics is new name that may have some potential. Despite the recent pop, the shares are still 18% below their late May IPO price of $6. The bankers were Piper Jaffray (lead), William Blair and ThinkEquity. We have respect for Piper, so this one is going to get more attention. We’re also adding a small position to the IPO Candy Folio (see below). The company is due to report earnings on November 4.

Turning to look at the major decliners, Dynavox (DVOX) has had the worst performance by far with a decline of 31% for the month and 64% for the last three months. The shares now trade at $5.60 versus their $15 IPO price in April of this year.

See the IPO Candy Performance page below for the all the details.

IPO Candy Folio Update

The IPO Candy Folio was up 8.3% for the month which brings the performance to 21.6% for three months. We made updates to the portfolio and sent out a separate email covering them on November 2nd.

More information and disclosures regarding the IPO Candy Folio can be found at http://ipocandy.com/invest.

Filings & The Pipeline

As usual, we are ignoring deals in areas like banks, container ships and cruise lines but we are looking at Masergy Commnications (secure virtualized network services), RDA Microelectronics (Chinese mixed-signal semiconductors), Noah Holdings (wealth management products in China), Complete Geonomics (human gene sequencing) and Everbank Financial (innovative banking).

New Coverage and Stock for Sale

We did spend a bit of time looking at two rival water companies and published our views via the blog in our post Still or Sparkling?

As expected, the brokers did initiate coverage of SouFun (NYSE:SFUN), a China-based real estate portal, which is due for banking coverage and had a tough time justifying a buy rating post the big run-up in the price. Goldman initiated with a Neutral but somehow Deutsche Bank managed to come up with a $96 price target in order to support a Buy rating.

There will be several companies getting new coverage incuding: China Ming Yang Wind (NYSE:MY), ChinaCache (NASDAQ:CCIH), KEYW Holding (NASDAQ:KEYW), Elster Group (ELT), Amyris (NASDAQ:AMRS) and SciQuest (NASDAQ:SQI) ChinaCache should be problematic for analysts given the 74% gain and 11x price/sales multiple. One name we are watching closely is SciQuest which has done well since the IPO with a gain of 21% but is trading close to our IV estimate of $13/share.

Companies that had lockup agreements come off in late October managed to hold up, with the exceptions of Codexis and Global Geophysical which had 8% and 10% declines respectively in the past two weeks.

The only lockup we have coming off early in November is TeleNav on the 15th. The shares have performed well lately thanks to a strong quarterly report on October 28th but remain 21% below the $8 IPO price.

Disclosure: Some of these companies are in the IPO Candy Folio. Information about the Folio and the holdings can be found at http://ipocandy.com/invest

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