The IPO Buzz: IPO Train Jumps Back On Track

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Includes: FNDR, KYAK, PANW
by: IPOScoop

When the IPO Express pulled into the Wall Street Station last week, it had a lot going for it. The train was on schedule and loaded with goodies.

The U.S. Securities and Exchange Commission window opened early Monday morning, July 9th, and by late afternoon on Friday the 13th, a total of 13 companies had filed updated amendments to their plans to go public. Ten of those 13 companies jumped on the calendar - five for this week and five for the next.

And that's not all, folks: Three new companies filed to go public last week. But in every summer, some rain must fall. One other company withdrew plans to go public; it had been in the IPO pipeline since August 2011.

On Schedule

Studies have shown that the IPO calendar closes down ahead of the July 4th Holiday and gets back on track by mid-July. (See: "The IPO Buzz: Mid-Summer IPO Calm" dated July 9, 2012.) This is exactly what is developing this year, but there's more.

There had been talk that the IPO market dried up because of the Facebook (NASDAQ:FB) deal. In reality, the underlying cause was a declining stock market. Facebook was priced on the evening of May 17 - eight weeks into the sell-off that began in March. The downturn had another two weeks to run.

The background: The stock market, as measured by the Nasdaq Composite Index, closed on a high on March 26 at 3,122.57 and took a 10-week spill to close on June 1 at 2,747.48, DOWN 12 percent.

Studies also have shown you can expect a revival of the IPO calendar about five weeks after a stock market bottom. (See "The IPO Buzz: Double Whammies and a Drought" dated June 10, 2012.)

The IPO market's typical five-week recovery time - plus or minus a week or two in any given year - materialized at the end of June. For the record, this year's recovery took just four weeks.

Bankers priced four deals during June's final week. As a group, they did well. Three closed on Friday, July 13, in the winner's circle and one was unchanged. The average gain for all four was 13.3 percent.

Then the IPO market hit its annual July 4th speed bump.

With these two hibernation periods behind us, one could say the 2012 IPO calendar is coming back to life on schedule.

Time to Rock 'N Roll

There are five deals on tap for this week. From all reports, it could be happy times in the IPO Valley. Most are said to be on somebody's or everybody's "most wanted" list. They are (alphabetically):

Fender Musical Instruments (FNDR) plans to price 10.7 million shares at $13 to $15 each on Thursday evening. The IPO is expected to start trading Friday morning on the NASDAQ Global Market under the proposed symbol "FNDR." The joint-lead managers are J.P. Morgan and William Blair. The co-managers are Baird, Stifel Nicolaus Weisel and Wells Fargo Securities.

The Fender name is entwined with the birth of rock and roll and American pop culture. Its legacy includes relationships with a "Who's Who" of musicians past and present from the worlds of rock, country and the blues - names like Buddy Holly, Brad Paisley, Bruno Mars, Eric Clapton, The Eagles, Jeff Beck, Jimi Hendrix, Melissa Etheridge, Merle Haggard, Sheryl Crow, Sting, The Strokes and The Who. Its Fender Stratocaster electric guitar, introduced in 1954, was the only instrument named an "American Icon" by Rolling Stone magazine in its 35th Anniversary Issue in May 2003, according to the prospectus.

Based in Scottsdale, Arizona, Fender Musical traces its roots back to 1946 when the predecessor company was founded by Leo Fender in California. In 2011, the company had the No. 1 market share in the United States - ranked by revenue - in electric, acoustic and bass guitars, and electric and bass guitar amplifiers, according to data from MI Sales Trak as of December 2011, according to Fender's prospectus. The company believes it is the world's leading maker of stringed instruments. Fender makes other instruments and PA equipment, such as acoustic guitars, electric basses, mandolins, banjos, violins and amplifiers. Fender Musical has about 2,800 employees.

Fender Musical plans to sell about 7.1 million shares and selling shareholders plan to sell about 3.6 million shares. The company expects to have about 26.4 million shares outstanding after the offering.

Worth Noting: To say that Fender Musical has brand-name recognition is like saying Chanel is a coveted fashion label. For the record, brand-name companies have done well in the IPO market.

Five Below (FIVE) plans to price 9.6 million shares at $12 to $14 each on Wednesday evening. (Note: It had been moved up from Thursday evening.) The IPO is expected to start trading Thursday morning on the NASDAQ Global Market under the proposed symbol "FIVE." The joint-lead managers are Goldman Sachs, Barclays and Jefferies. The co-managers are Credit Suisse, Deutsche Bank Securities, UBS Investment Bank and Wells Fargo Securities.

Based in Philadelphia, Five Below is a rapidly growing specialty value retailer. The retailer offers a broad range of trend-right, high-quality merchandise targeted at the teen and pre-teen customer. Its dynamic assortment of products, all priced at $5 and below, includes brands and licensed merchandise across a number of categories such as tie-dye T-shirts, tube-top dresses, flip-flops, jewelry and nail polish. Five Below was formed in 2002. It has about 2,960 employees.

Five Below plans to sell about 4.8 million shares and selling shareholders plan to sell about 4.8 million shares. The company expects to have about 54 million shares outstanding after the offering.

Note: Five Below is a fast-growing specialty retail store, a sector that has done well in the IPO market.

KAYAK Software (NASDAQ:KYAK) plans to price 3.5 million shares at $22 to $25 each on Thursday evening. The IPO is expected to start trading Friday morning on the NASDAQ Global Market under the proposed symbol "KYAK." The joint-lead managers are Morgan Stanley and Deutsche Bank Securities. The co-managers are Piper Jaffray, Stifel, Nicolaus Weisel and Pacific Crest Securities.

Based in Norwalk, Connecticut, Kayak Software is an online travel service provider founded by Daniel S. Hafner and Paul M. English, co-founders of Expedia, Travelocity and Orbitz. The company's Website and mobile applications enable users to research and compare accurate and relevant information from hundreds of other travel Websites in one comprehensive, fast and intuitive display. Kayak Software was formed in 2004. It has about 185 employees.

Kayak Software plans to sell all of the shares in the offering. The company expects to have about 38.6 million shares outstanding after the offering.

Note: The travel-service sector has been hot this year.

Palo Alto Networks (NYSE:PANW) plans to price 6.2 million shares at $34 to $37 each on Thursday evening. The IPO is expected to start trading Friday morning on the New York Stock Exchange under the proposed symbol "PANW." The joint-lead managers are Morgan Stanley, Goldman Sachs and Citigroup. The co-managers are Credit Suisse, Barclays, UBS Securities and Raymond James.

Based in Santa Clara, California, Palo Alto Software believes it has pioneered the next generation of network security with its platform that lets enterprises, service providers and government entities secure their networks and safely enable the complex and growing number of applications running on their networks. The core of Palo Alto's platform is its Next-Generation Firewall, which offers a number of benefits for its end-customers, including the ability to identify, control, and safely enable applications while inspecting all content for all threats in real time. Palo Alto Networks was formed in 2005. It has about 700 employees.

Palo Alto plans to sell about 4.7 million shares and selling shareholders plan to sell about 1.5 million shares. The company expects to have about 66.6 million shares outstanding after the offering.

Note: Another cloud-computer IPO, a hot sector in the IPO market.

This brings us to next week and another IPO calendar of five deals.

Stay tuned.

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