After a very stormy and shaky August (especially if you live around NYC) the IPO market is trying to right itself and get back into a rhythm. Most of the deals in active marketing decided to delay their offerings and may materialize in September if markets settle down. Two deals did price, though: Carbonite (CARB) and Tudou Holdings (TUDO). To get the deal done, Carbonite priced at $10 versus the $16 midpoint of the filing range. Carbonite is one we have liked and recently added to the IPO Candy Folio along with a few others (see below). Todou is another China-based online video player. Together with Youku, these two are the “Coke and Pepsi” of the Chinese video market.
So far September is off to a slow start. The media has been obsessed with the GroupOn IPO (GRPN), which appears to be either getting killed by “bad market conditions” or dying a natural death based on their questionable financials and enfant terrible CEO.
New IPO filings have been more encouraging; there were 23 in August. Those we plan to include in the ecosystem and consider for coverage and inclusion in the IPO Folio are shown in the table below. One can’t help but notice the high number of companies that are still losing money (in some cases quite a bit) in this filing group. Unless the market becomes more risk friendly these companies may struggle to get public.
Company | Positioning | Comment | Website |
Guidewire Software (GWRE) | Insurance Software | Operational software for P&C insurance. Solid growth and profitability. | |
MobiTV | TV Services | Delivery of TV to IP devices. Losing money. | |
Bazaarvoice (BV) | Social Commerce | “Word of mouth” marketing. Losing money. | |
Angie's List | Online Services | Consumer sourcing for service providers. Solid growth but surprisingly big losses. | |
Jive Software (JIVE) | Corporate Collaboration | Internal social networking style tools for the enterprise. Large losses. | |
Genomatica (GENO) | IT for Chemicals | Bio-engineered processes for chemical production. Development stage. | |
Brightcove (BCOV) | Video Software | Helps publishers package and deliver video. Smaller revenues than we thought. | |
Eloqua Limited (ELOQ) | Revenue Mgmt SW | Revenue analysis, campaign and lead optimization. Solid growth, small losses. | |
Community Choice (CCFI) | Financial SVCS | Banking services for the unbanked. $260m RR with 10% oper. profit. | |
CyOptics (CYOP) | Optical NW | Integrated optical components. $120m RR with 27% GM and recent profitability. | |
FusionStorm Global | IT Services | Kind of an IT services rollup to a $700m+ firm with small losses. | |
Chuy’s Holdings | Mexican Restaurants | Another profitable restaurant concept with solid growth and a 10% oper. profit. | |
Exa Corp. | Simulation SW | Slow growth, slim profits, niche. | www.exa.com (nice url!) |
Era Group | Helicopters | What will investors pay for that? | |
M/A-COM Technology | Wireless Semiconductors | Big growth to $300m RR, turned profitable with margins expanding. | |
Vocera Comms | Mobile | Comms for hospitals, small, losing money. |
There are only 2 deals in active marketing right now. Most companies seem to be waiting for at least a week of stability before starting their roadshows. Only time will tell if they can start in September or not.
Performance
The average stock in our ecosystem was actually up 1% in August, underperforming the S&P, which was up 5%. The top 10 names were up 28% and the bottom 10 were down 34%.
During the month, analysts noted that A123 Systems had fallen so far that it was a bargain stock. That helped to drive the fallen angel to a price greater than their cash per share.
Top 5 | |||
Company | Ticker | Gain | Area |
A123 Systems | AONE | 46% | Advanced Batteries |
KiOR | 36% | Biofuels from pine trees | |
GenMark | 35% | Molecular Diagnostics | |
FXCM | 32% | Online FX Trading | |
HomeAway | 28% | Vacation Home Rentals | |
Bottom 5 | |||
Company | Ticker | Loss | Area |
Taomee | 36% | Online Community | |
Epocrates | 38% | Mobile Drug Info | |
CTPartners | 40% | Mgmt Recruiting | |
Motricity | MOTR | 52% | Mobile Data Services |
Camelot | 52% | China IT Services | |
Of the losers, Motricity is the most striking with a drop of 52% in the month of August. In less than a year Motricity has declined from their post-IPO high of $30 to $2.10. A string of disappointing quarters and the departure of the CEO mark a massive disappointment for anyone who invested in this debacle. Might be due for at least a “dead cat” bounce at these levels.
IPO Candy Folio Update
We had the good fortune to eliminate 6 companies from the Folio in July ahead of some nasty market volatility and begin to nibble on some new opportunities.
This month we are continuing to gradually add to our positions and incorporate a few new names.
We made some changes in the IPO Candy Folio to “make room” for some newcomers.
Reductions
None.
Increases
- RPXC, 2% to 3%, adding on pullback
- ELLI, 3% to 3%, adding on pullback
- YNDX, 2% to 3%, adding on pullback
New Positions
- CARB, 3%, consumer online backup & restore
- FIO, 2%, high performance computing HW
- ACTV, 2%, internet service for active people
Our cash position drops back to 5% from 15%.
The Pipeline
There’s not much to talk about in active marketing now. However, we have added the filings to our pipeline spreadsheet, which now has a total of 80 filings that we are watching.
See the IPO Candy Ecosystem Pipeline table for more details.
Coverage and the Calendar
There are a couple of names due to banker coverage in the next few weeks: Carbonite and Tudou.
Lockups are due to come off for Tranzyme (TZYM), Qihoo 360 (QIHU), ServiceSource (SREV) and Cornerstone OnDemand (CSOD).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
