Stocks closed higher for a third week as investors continued to gravitate towards vetted large-cap U.S. benchmark exposure while select stocks plunged. While dodging the Facebook (FB) bullet, the key IPOX Indexes underperformed for a second week in a row. Strong debuts of last week's key IPOs. After Facebook, Zynga (ZNGA), Groupon (GRPN) etc., low float IPOs are out.
· IPOX Indexes mixed, trail benchmarks for a third week, select stocks plunge: Key benchmarks with blue-chip exposure such as the S&P 500 (SPX: +1.71% to +10.21% YTD) continued to lead markets to a third week of gains as expectations for concerted stimulus caused big short covering. With individual stocks plunging on earnings, the IPOX Indexes traded mixed again. Relative weakness was spread amongst the IPOX Regional universe: In the United States (IPXO, IPXT), the IPOX U.S. 30 (IPXT) rose just +0.78% to +13.78%% YTD, as the impact of strong earnings in payment processor Visa Inc. (V: +2.70%) or data provider Nielsen Holdings (NLSN +8.89%) was mitigated by a big plunge in stocks including travel website operator Trip Advisors (TRIP: -21.14%), electric car maker Tesla Motors (TSLA: -7.17%) and doughnut maker Dunkin Brands (-9.30%).
The story of the week belonged to the plunge in some of the recent high profile U.S. IPOs including the low float social networkers Facebook (FB: -17.58%), still a USD 56.4bn company, and YELP (-18.88%), after earnings. Amid no guidance, the 240.46m of vested Class B Facebook restricted stock units reserved for the purchase of Instagram, e.g., present further overhang for the stock going forward.
The IPOX Europe universe traded higher as Spanish Financial Bankia (BKIA SM: +12.62%) recovered and Spanish travel reservations processor Amadeus IT Holdings (AMS SM: +6.62%) hit a new post-IPO high. Developed Asia-Pacific (IPTA: -2.09% to +10.18% YTD) remained jittery on indiscriminate selling in social networker Gree Inc. (3632 JP: -16.33%) through the week and declines in Macau casino stock Sands China (1928 HK: -6.61%) on earnings. Korean-run gamer Tokyo-traded Nexon (3659 JP: +9.79%) closed near a post-IPO high. Dedicated China-linked exposure (CNI), remained under pressure with the IPOX China 20 (CNI: -2.31% to -5.90% YTD) falling on weakness in property developers including Evergrande (3333 HK: -6.84%).
Most significant IPOs traded (Week 07/27/12):
|Company||Ticker||Return / IPO (%)|
|Chuy's Holdings Inc||CHUY US||31.69|
|Del Frisco's Restaurant Group Inc||DFRG US||0.00|
|E2open Inc||EOPN US||-10.00|
|Hyperion Therapeutics Inc||HPTX US||2.00|
|IHH Healthcare Bhd||IHH SP||15.45|
|Natural Grocers by Vitamin Cottage Inc||NGVC US||32.67|
20 firms started trading with the average (median) IPO rising +13.55% (+4.82%) based on the difference between the final offering price and the week's close. The most interest was in the brand-name U.S. growth IPOs (CHUV US and NGVC). Malaysian hospital operator IHH Healthcare Bhd. (IHH SP: +15.45%) celebrated a successful stock market listing.
· The Week ahead - Low Float IPOs are out:
|Calibre Group Ltd||CGH AU||AU||GS, UBS|
|Eloqua Inc||ELOQ US||U.S.A.||Deutsche Bank|
|Globus Medical Inc||GMED US||U.S.A.||GS, Piper|
|Legalzoom.com Inc||LGZ US||U.S.A.||BofA|
|Stemline Therapeutics||STML US||U.S.A.||JMP, OPP|
A further string of small-cap U.S. IPOs are lined up, all of them higher float IPOs: On-demand software provider Eloqua Inc. (ELOQ) seeks to raise USD 105.8m for a 28.72% stake in the firm mainly earmarked for growth. The IPO values the growth firm at an initially attractive 5.32x 2011 revenues, indicating that investment bankers imply an initial pop of between 30-40% at current terms. Incumbent DB--led and 3/12 IPO Demandware (DWRE) has traded with little upside since its 47.44% initial jump. GS-led Globus Medical (GMED) is a medical device maker specialized in devices related to spine disorders seeking to raise USD 200m for 12.89% of the firm.
With about 80% of the proceeds going to selling shareholders, the profitable and growing company is initially valued at 4.68 times 2011 revenues, about double of medical implant maker and 2001 IPO USD 10.4bn Zimmer Holdings (ZMH). Morgan Stanley-led online legal service provider Legalzoom.com (LGZ) seeks to raise USD 88m for a 19.87% stake at an attractive valuation of 2.84 times 2011 revenues. With more than 50% of the proceeds going to selling shareholders, the firm finished 2011 with a profit. No-revenue U.S. cancer research biotech Stemline (STML), selling 32.85% to raise USD 42m) and Australian small-cap engineering service firm and UBS/GS-led Calibre Group (CGH AU) round out this week's global IPO deal calendar.
|Ticker (BBG/Reuters)||Week||Q2 12||YTD 12|
|IPOX Global 50 (IPGL50) (USD)||-0.13%||-8.13%||+7.75%|
|MSCI World (MXWD)||+1.39%||-6.35%||+5.32%|
|IPOX U.S. 100 (IPXO)||+1.12%||-5.23%||+13.97%|
|IPOX U.S. 30 (IPXT)||+0.78%||-3.67%||+13.78%|
|S&P 500 (SPX)||+1.71%||-3.29%||+10.21%|
|IPOX Europe50 (IPXUJPEU) (EUR)||+0.37%||-10.75%||-3.84%|
|IPOX Europe30 (IXTE) (EUR)||+0.56%||-12.33%||-7.88%|
|STOXX 50 (SX5P) (EUR)||+0.49%||-3.16%||+3.75%|
|IPOX Asia-Pacific 30 (IPTA)||-2.09%||-5.69%||+10.18%|
|MSCI Asia-Pacific (MXPC)||-0.57%||-6.89%||+1.54%|
|IPOX China 20||-2.31%||-8.97%||-5.90%|
|Hang Seng Enprs. (HSCEI)||-1.79%||-10.12%||-5.41%|
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.