As global investors prepare for one of the most anticipated IPOs since the dawn of the social media age, I think it's imperative we canvas the landscape in an effort to develop several investing strategies in terms of recent new issues.
Facebook (FB) - The social media behemoth is set to go public on May 17th and boy is there interest. For the last few months the stock has traded in the private market through such outlets as SecondMarket.com and has drawn the attention (and not the capital) of most individual investors. It's clear that if you were 'friended', 'poked', 'requested', or 'sent a Farmville request' you know about Facebook, however you might not know the advantages or disadvantages there are to owning stock in such a popular social tool.
The biggest question may investors have directly relates to Market Cap. How big will Facebook actually be? Some investors are beginning to think $100 billion is actually a conservative estimate; I disagree and think that number is right on target. The intrinsic value after the acquisitions of such companies as Instagram heightens the value, however given the limited number of shares Facebook is issuing; some individual investors might be left out in the cold.
It is believed that Facebook will be issuing 2.5 billion shares, priced at $40/share, which values that company at exactly $100 billion. Investors should keep in mind no one knows exactly how many shares are being issued. The goal of the IPO is to raise an additional $5 billion, though $20 billion or higher wouldn't be out of the question.
If you're a nostalgic investor, or one of these people that likes to say 'I invested $1,000 on day one and here I am 20 years later with X dollars', then by all means acquire a small position and forget about it. If you happen to be a long term investor really looking to significant money in the company, wait until they issue their first earnings report and use their guidance as a key variable moving forward. I personally like the company and its structure; however shareholder rights may be an issue as there are with such companies as Google, Inc. (GOOG).
ProofPoint (PFPT) - Headquartered in Sunnyvale, CA, ProofPoint provides data protection solutions for companies and governments. Structured on the SaaS (software-as-a-service) model, PFPT currently serves more than 2400 global clients helping assist with such things as theft of sensitive information and the security of customer information channels.
Shares of ProofPoint began trading on April 20th and popped as much as 20% during intra-day trading. The company, under the leadership of Gary Steele, is one of the foremost innovators in data security and information preservation. By examining the global footprint already in place, the company is a great long term buy especially at its current price point. I would acquire a small position during the first week or two of trading, then thoroughly examine the company's first earnings report to determine how positive the guidance will be.
Splunk (SPLK) - San Francisco based 'Big Data' darling, Splunk, hit the markets on April 19th with a bang. The company priced the 13.5 million shares of the IPO at $17/share, and by the end of the day they surged over 100%. Investor sentiment was very positive, especially since the company has a product that sells itself, which in turn reduces gross margins.
There are two things investors should know. The first is Splunk has been rumored to be the radar of Dell Computer (DELL) and Oracle (ORCL), as a possible acquisition target pre-IPO. If an acquisition by either company were to take place, Splunk could essentially pay immediate dividends considering they specialize in operational intelligence. Operational Intelligence essentially gets to the root cause of an efficiency issue, determines a solution, then executes the solution in a faster time then the initial strategy that was previous in place.
The second thing we potential investors should note is Splunk's pricing structure. Rather than give businesses individual software licenses and limit revenues, the company charges its clients based on indexed daily usage which equates into higher sales bookings without limiting profits. As a client uses more and more data, higher revenues are generated which enhances Splunk's bottom line.
Splunk is a winner. With gross margins twice the size of Facebook and one of the best pricing structures since the early days of enterprise software, SPLK will be around for a while. With annual sales growth of 82% and a market cap of just over $1 billion, Splunk is not only a great investment, but could very well be on the radar of several other big name companies. The same strategy applies to Splunk as it does to ProofPoint and Facebook, acquire a small position in the beginning and determine the direction of that position after earnings are announced.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.