The aftershocks of the Facebook (FB) IPO were felt in IPO Valley all last week. It was a significant event, but nevertheless, an isolated event.
The media and all the soapbox orators had something to say. Some predicted the end of the IPO market. Others got in a lather about the Internet Bubble II of 2012. But this much we know:
- It will be a gold rush for lawyers. In the end, they stand to collect millions of dollars in fees, and depending upon the courts, their clients might collect pennies. That's the way it goes with Wall Street class-action lawsuits.
- The Internet Bubble II of 2012 was just one IPO.
Reportedly those who got caught up in the hysteria were individuals taking their first plunge in the IPO market. But to most of the hard-core new-issues investors, it was just another day at the dog track.
Let's take a look at Internet Bubble I of 1999/2000. It produced 992 IPOs, according to the U.S. Securities and Exchange Commission filings. Of that group, 206 - or slightly more than one in five - scored opening-day moonshot gains of 100 percent or more.
Worth noting: Internet Bubble I was a two-year affair.
It started on Nov. 10, 1998, when EarthWeb priced its IPO of 2.1 million shares at $14 each, and closed its opening day on Nov. 11, 1998, at $48.69 - UP 247.8 percent from its initial offering price.
The last moonshot came on Nov. 6, 2000, when Transmeta priced its IPO of 13 million shares at $21 each, and closed its opening day on Nov. 7, 2000, at $45.25 - UP 115.5 percent from its initial offering price.
A passing point of interest: Neither company is around today.
An IPO Reality Check
Here's how things stand on Memorial Day 2012.
The IPO pipeline has about 185 companies in registration. The stock market is in correction mode. And we have a three-day holiday weekend, which has been known to slow down the IPO traffic.
The IPO Pipeline
There are about a dozen industrial sectors that have IPO candidates waiting to go public, but there two sectors that investment professionals are watching. They are cloud-computing and restaurants. The reason is straightforward - superior aftermarket performances by those that have already come to market. Let's take a look.
In the Cloud
- Splunk (SPLK) priced its IPO at $17 per share on April 18 and closed on Friday, May 25, at $35.48 - UP 111.4 percent from its initial offering price.
- Guidewire Software (GWRE) priced its IPO at $13 per share on Jan. 24 and closed on Friday, May 25, at $26.20 - UP 101.5 percent from its initial offering price.
- Demandware (DWRE) priced its IPO at $16 per share on March 14 and closed on Friday, May 25, at $29.92 - UP 87 percent from its initial offering price.
In the pipeline: Palo Alto Networks (TBA), Reval Holdings (TBA), ServiceNow (NOW) and others.
Grabbing a Bite
- Dunkin Brands Group (DNKN) priced its IPO at $19 per share on July 26, 2011, and closed on Friday, May 25, 2012, at $32.73 - UP 72.3 percent from its initial offering price.
- Ignite Restaurant Group (IRG) priced its IPO at $14 per share on May 10, 2012, and closed on Friday, May 25, 2012, at $17.94 - UP 28.1 percent from its initial offering price.
In the pipeline: Bloomin' Brands (BLM), which is the parent of Outback Steakhouse, famous for its diet-killer Bloomin' Onion appetizer; Chuy's Holdings (CHUY) the Austin, Texas-based parent of Chuy's, a Tex-Mex haven that began in 1982 and fed hordes of hungry rockabilly fans after almost all-night concerts at the old Armadillo World Headquarters, and Del Frisco's Restaurant Group (DFRG), a steakhouse chain born in Dallas and now in 15 states, with a New York menu that includes caviar, a $94 Wagyu steak and a drink called the Margatini -- plus other restaurants waiting to go public.
Nasdaq Slips into Correction Mode
The Nasdaq Composite Index, the barometer of the IPO market, crossed into a correction phase on May 18 when it closed at 2,778.79, DOWN 11 percent from 3,122.57, its previous closing high on March 26. A correction is generally considered a pullback of at least 10 percent from a recent closing high.
On Friday, May 25th, the Nasdaq closed at 2,837.53 - down 9.1 percent from its most recent closing high.
Memorial Day Speed Bump
There have been times that the IPO production line closes down around the Memorial Day holiday. Here's the post-Memorial Day traffic over the last few years:
- In 2011: The first IPO was priced on June 9.
- In 2010: The first IPO was priced on June 11.
- In 2009: The first IPO was priced on June 2.
- In 2008: The first IPO was priced on June 18.
At press time, this week's IPO calendar is "clean and green." But if stock market conditions improve and the Facebook hysteria fades, June could turn out all right.