There’s a big difference between the sizzle and the steak in any IPO calendar. Sometimes they come together and other times - well, let’s take last week’s Pandora Media (P). It was a classic example of each going their separate ways.
The hype on Pandora was a flashback to 1999’s “insanity-dot-com” era. Here was an Internet company, a leader in its industrial sector with soaring revenues and millions of dollars in losses, hitting the IPO calendar.
Pandora originally announced plans to price 13.7 million shares at $7 to $9 each. The deal was increased to 14.7 million shares at $10 to $12 each and then priced, on June 14, at $16 per share - an increase of 100 percent from the mid-point of its initial price range.
And what’s the sizzle telling you?
On Wednesday, June 15, the IPO opened at $20 per share, hit a high of $26 and then the sizzle – well, it fizzled out. It was over.
Pandora’s stock closed its opening day at $17.42 and was heading south. On Friday, it hit a low of $12.16 before closing at $13.40 - DOWN 16.3 percent from its initial offering price.
There were sobering statements buried on page 11 of Pandora’s prospectus. They said: “Since our inception in 2000, we have incurred significant net operating losses and as of April 30, 2011, we had an accumulated deficit of $92.1 million.” And the prospectus added: “We have not in the past generated, and may not in the future generate, sufficient revenue from the sale of advertising and subscriptions to offset such royalty expenses.”
Not everybody was buying the hype. A couple of folks were looking at the steak – the company.
On Friday, June 10, Morningstar issued a report on Pandora. It stated: “However, Morningstar senior analyst Rick Summer isn’t seeing the investor love for Pandora, and pegs his fair value estimate at only $6 per share. His concerns around the company’s business model and some of his thoughts on overall valuation are below . . .” and the report goes on.
Post-pricing ‘Thumbs Down’
On Thursday, June 16, BTIG Research analyst Richard Greenfield initiated research coverage of Pandora with a “SELL” Rating and a one-year price target of $5.50. That was 68.4 percent below its previous close of $17.42.
Pandora and its underwriters will not be able to issue comments during the 40-day quiet period required by the federal Securities Act of 1933.
From Texas to Tennessee
This brings us to this week. The calendar lists only three deals. The IPO handicappers are reportedly not looking for any sizzle. Let’s look at the line-up.
KiOR (KIOR) is a Pasadena, Texas-based next-generation renewable fuels company. The company has developed a proprietary technology platform to convert low-cost, abundant and sustainable non-food biomass – such as pulp logs, sorghum or algae - into hydrocarbon-based “renewable crude oil.”
Founded in 2007, KiOR has about 100 employees. It reported a net loss of $53 million on no revenues for the 12 months ended March 31, 2011.
The company plans to offer 10 million shares at $19 to $21 each to raise about $200 million.
The IPO is expected to be priced on Thursday evening, June 23, and to trade on Friday morning, June 24, on the NASDAQ Global Market under the proposed symbol “KIOR.” Joint-lead managers are: Credit Suisse, UBS Investment Bank and Goldman Sachs.
Stewart & Stevenson LLC (proposed - SNS) is a Houston-based provider of specialized equipment, parts and service for the oil and gas industry and other industries for over 100 years.
The company has about 2,550 employees. It reported net income of $13.8 million on revenues of $271.4 million for the three months ended March 31, 2011, compared with a loss of $4.7 million on revenues of $161.9 million for the same period a year ago.
Stewart & Stevenson plans to offer 16 million shares at $14 to $16 each to raise about $240 million.
The IPO is expected to be priced on Tuesday evening, June 21, and to trade on Wednesday morning, June 22, on the New York Stock Exchange under the proposed symbol “SNS.” Joint-lead managers are: J.P. Morgan, Goldman Sachs and Citi.
(Note: The company plans to offer 11 million shares and selling shareholders plan to offer 5 million shares.)
Vanguard Health Systems (VHS) is a Nashville, Tennessee-based regionally focused provider of healthcare delivery networks operating 26 acute care and specialty hospitals.
The company, founded in 1997, has about 38,500 employees. It reported net income of $1.6 million on revenues of $3.4 billion for the three months ended March 31, 2011, compared with a loss of $49.9 million on revenues of $2.5 billion for the same period a year ago.
Vanguard Health plans to offer 25 million shares at $21 to $23 each to raise about $550 million.
The IPO is expected to be priced on Wednesday evening, June 22, and to trade on Thursday morning, June 23, on the New York Stock Exchange under the proposed symbol “VHS.” Joint book-lead managers are: BofA Merrill Lynch, Barclays Capital, Citi, Deutsche Bank Securities and J.P. Morgan.
Stay tuned for next week’s IPO traffic.
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.