Just as things seemed to be slowing down for the summer, the IPO market has picked up the pace and enters August with an appetite. The recent "crash" may end the party before it can really finish, but we'll see. Several deals in active marketing right now [Carbonite, InvenSense, Trustwave, WageWorks (WAGE) and WhiteGlove Health (WGH)] are on our watch lists. We’ve also recently completed research and published reports on Tangoe (TNGO) and Skullcandy (SKUL) for IPO Candy Toffee subscribers.
Company | Positioning |
Intermolecular | Semi Design Tools |
Ignite Restaurant | Restaurants |
Argos Therapeutics | Cancer Therapy |
South Valley Bank | Bank |
TIM WE SGPS | Mobile Payments |
Sprague Resources | Petroleum Sales |
Morgan Properties | REIT |
Proto Labs | Rapid Prototyping |
Loyalty Alliance | Online Marketing |
Plant Payment | Online Payments |
Cathay Industrial | Biotechnology |
AmREIT | REIT |
Red Stone | Bond Fund |
Renewable Energy | US Biodiesel |
U.S. Silica | Silica Producer |
Demandware | E-commerce SW |
Norwegian Cruise | Cruise Lines |
Dave & Buster’s | Restaurants |
Greenway Medical | Healthcare IT |
ZELTIQ Aesthetics | Body Fat Removal |
MacDermid | Specialty Chemicals |
Emmaus Holdings | Rare Disease Therapy |
ALDA Office | Real Estate Mgmt |
GSE Holdings | Material Handling |
Merrimack | Pharmaceuticals |
Silver Spring NW | Digital Power |
Sunshine Silver | Mining |
Union Agriculture | Land in Uruguay |
TransUnion | Credit Information |
Zynga | Social Gaming |
Manning & Napier | Investment Mgmt |
Tilly’s | Specialty Retail |
There were 32 new IPO filings in the month of July (shown in the table above, with our planned coverage names in bold type.) There were 15 pricings completed in July with momentum building over the course of the month – 9 of them were priced between the 27th and the 29th. Of particular note for our coverage were Zillow (Z), Skullcandy, Francescas (FRAN), Dunkin’ Brands (DNKN), Tangoe, Chef's Warehouse (CHEF), and Teavana (TEA).
There are 11 deals in active marketing right now. It’s unclear if more companies will hit the road this week as the deepest part of the summer approaches.
Selected Filing Notes
Silver Spring Networks (SSNI) is an IT-focused play on energy, aka “the smart grid.” The company has been much talked about as a very promising private player in the space. They recently filed for an IPO with the “dream team” of Morgan Stanley, Goldman Sachs and Deutsche Bank along with a large supporting cast of 8 other banks, including technology deal up-and-comer Baird. Baird also appears on InvenSense, another attractive technology deal in marketing right now. Silver Spring has positioned itself to benefit from nearly all new growth and innovation in energy use since they provide an internet-based platform that cuts across energy distribution, metering, efficiency, demand response and electric vehicles. Silver Spring is showing explosive growth. Billings increased from $17.5m in 2008 to $195m in 2009 to $261m in 2010. Revenues went from $3.2m for the year ended December 2009 to $70m for 2010 and are on track to triple to over $200m in 2011. Silver Spring is investing aggressively to support what could be a $1b sales company in just a few years, with losses of $148m for 2010 and $33m in the quarter ended March 31, 2011. There has already been large investment interest in different segments of the market. Popular public names include EnerNOC (ENOC), Comverge (COMV), and Itron (ITRI). Silver Spring should appeal to a broad range of investors.
Performance
The average stock in our ecosystem was down 7% in July, underperforming the S&P, which was down 5%. The top 10 names were up 22% and the bottom 10 were down 35%.
After a terrible beating in June the Chinese stocks attracted some interest from bargain hunters. Investors painted nearly all the Chinese stocks with the same brush.
Top 5 for July | |||
Company | Ticker | Gain | Area |
NetQin | 46% | Mobile Security | |
Jiayuan | 31% | Online Dating in China | |
Taomee | 31% | China online community | |
ZST Digital | ZSTN | 28% | China Cable EQ |
Bona Film | 24% | China Film Distributor | |
Bottom 5 for July | |||
Company | Ticker | Loss | Area |
Sequans | 48% | Comm Semis | |
TeleNav | 45% | Mobile Navigation | |
RealD | 40% | 3D Cinema | |
Fabrinet | 40% | Optical Components | |
MaxLinear | 34% | Mixed-signal semis | |
Most of the companies with big losses in July disappointed investors in terms of their business prospects. Sequans was notable because it disappointed on gross margins while noting that order patterns and industry directions all took a turn for the worse. This led them to give weak guidance for the next quarter and the whole year. Such a major set of changes so soon after an IPO is likely to make it hard for the current management team to win back long-term investors.
IPO Candy Folio Update
We made some changes in the IPO Candy Folio to “make room” for some new names.
Reductions
- Calix (CALX), 3% to 0%, exposed to US government
- CDC Software (CDCS), 2% to 0%, too many acquisitions
- MediaMind Tech. (MDMD), 2% to 0%, company sold, take profits
- Meru Networks (MERU), 2% to 0%, CSCO will buy or beat
- SemiLEDS Corp. (LEDS), 3% to 0%, no margins in business
- Symmetry Medical (SMA), 4% to 0%, giving up on turnaround
Increases
- RPX Corp. (RPXC), 1% to 2%, adding on pullback
- Ellie Mae Inc. (ELLI), 1% to 2%, adding on pullback
- Seaquans Communications (SQNS), 2% to 3%, adding on pullback
- Yandex (YNDX), 1% to 2%, adding on pullback
New Positions
NONE
Our cash position increases from 6% to 15%.
The Pipeline
There are 11 active roadshows right now, which is pretty busy for August. The pipeline continues to expand, suggesting a busy September/October if the market holds up.
Coverage and the Calendar
There should be underwriter coverage of KiOR (KIOR), HomeAway (AWAY), Zillow, Skullcandy and Francescas in August.
Recently lockups have come off for Nielsen, Demand Media, Velti, InterXion, BCD Semiconductor, NeoPhotonics, Epocrates, Tornier, and Endocyte. In the next week lockups expire for Gevo, Fluidigm and AcelRx.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
