Discounted Valuations As The June 2011 IPOs Hit Their 1-Year Mark

by: Kevin Quon

One year has passed since the initial public offerings of June 2011 were conducted and a cursory glance shows that the graduating freshmen class has become representative of the IPO market as a whole. In a single word, the results are 'disappointing.' Of the eight companies that went public in the middle of last summer, six have fallen to price levels below their initial offering price. Of those six, every one of them has fallen more than 20% below that offering price. Of the two that now currently trade above their initial offer, the highest gain is 16.3%.

Name Offer Date Offer Price Market Cap. Last Price (6/25) % Change
HomeAway (AWAY) 6/29/11 $27 $1.69 B $20.50 (24.1%)
KiOR (KIOR) 6/24/11 $15 $907 M $8.70 (42%)
Vanguard Health Systems (VHS) 6/22/11 $18 $625 M $8.12 (54.9%)
Bankrate (RATE) 6/17/11 $15 $1.74 B $17.44 16.3%
Compressco Partners, L.P. (GSJK) 6/15/11 $20 $178 M $11.50 (42.5%)
Pandora Media (P) 6/15/11 $16 $1.75 B $10.49 (34.4%)
Fusion-io (FIO) 6/09/11 $19 $1.96 B $21.05 10.8%
Taomee Holdings (TAOM) 6/09/11 $9 $156 M $4.28 (52.5%)

Of those whose prices have appreciated over the past year, only Bankrate and Fusion-io can have a claim to success. Yet neither company has performed in a manner than raises more than an eyebrow. Bankrate gained 16.3% and Fusion-io gained 10.8% over the past 12 months.

Of the more widely followed names, KiOR and Vanguard Health Systems stand out as sore thumbs in this crowd of offerings. KiOR and Vanguard had both raised $150 million and $450 million of capital in their respective IPOs. Yet the offerings of both companies were largely met with weak demand from the start, as they both priced on the lower end of initial demand estimates.

KiOR is an advanced biofuel producer that utilizes a proprietary technology platform to convert woody biomass into a hydrocarbon fuel commodity. According to the company's S-1 filing, KiOR had stated it would be able to create gasoline and diesel blendstocks at an unsubsidized production cost of less than $1.80/gallon. Given the high-volume, low-margin, and capital-intensive industry it found itself in, the market appears to have had little patience over the last year as it waits for the company to bring online its manufacturing capacity. Likely to operate several years to come at a loss, the company's discounted share price appears to be negatively trending as it burns through its cash reserves to bring its plants online starting with its facility in Columbus, Mississippi.

Vanguard Health Systems has lately been feeling the heat as it's stock blows with the hot air coming out of Washington. The company is highly dependent upon Medicaid income to survive and therefore remains vulnerable to the instability of politics. With a lack of stability on the horizon, the company has been trading less than half the fair price once perceived last year. For optimists betting on "Obamacare" to be upheld in a very imminent ruling, Vanguard currently trades at levels that some may find to be worthy of speculative positions.

Disclaimer: Please read my standard disclaimer found here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.