The last IPO I wrote about was the Facebook (FB) circus. I do not think I can recall a worse IPO, from start to finish, in my entire life. The article can be read right here: Facebook: Dead On Arrival For Investors?
Fairly prophetic title don't you think? I believe I even nailed my overall description of the entire "situation":
"Facebook has become another vast wasteland of wasted time, wasted opportunity, and lost potential. I am also not even smart enough to know what the actual potential of these social media sites are, but I do know when I really cannot stand it anymore."
Even more prophetic was this follow up article which, looking back, is eerie to read.
We need not go over the disastrous details of the Facebook debacle. The shattered share price basically tells it all:
Just for hoots and hollers, let's also look at Zynga's glorious chart:
Now that I have dazzled you with my past crystal ball prognostications, what could I possibly come up with now?
LegalZoom (LGZ) is a new IPO that I happen to think could be a winner over the intermediate to long term. Actually, if you can get in at the right price, LGZ might even be a sweet surprise for a short term trade.
First things first. Here is their S-1 filing of 7/23/2012 for you to review. The notable highlights within, are the following:
- 8 million shares to be offered of which 4.2 million are insiders shares
- A reasonable initial price of $10-$12.00/share, to raise about $85 million
- With roughly 43 million shares outstanding in total, the market value would be pegged at about $480 million.
Its current P/E is about 40, based on last years earnings, as LegalZoom finally became profitable to the tune of $12 million in profits. It also increased revenues by about 30% in 2011, as it expanded it's business model which has had some competition. This company appears to be growing.
It has been around since 1999 and has it's co-founder, Robert Shapiro, as the lead spokesperson on TV. Shapiro came into national focus with his role as lead attorney for O.J.Simpson, and while that trial galvinized many people, it also became THE trial that made the lawyers famous. Shapiro is widely recognized and respected and gives LegalZoom that recognizable face to go with it's brand. It has worked.
That is not to say that everything has been just peachy. As with any company, they have faced, and continue to face, civil actions, and one class action was recently settled for $5.4 million.
Most of the legal action against the company stem from plenty of misunderstanding as to what the company actually does. While they are not a law firm, they do have a legal staff and para legals that make sure that the forms they offer are accurate and up to date, and legal. That being said, some users of the service were either dissatisfied or thought they were getting a law firm to represent them.
For our purposes here, we need to note that LegalZoom is growing both their revenues, as well as becoming profitable. Even though they failed to make a profit for the first quarter of this year, the potential for future growth seems to be at hand, and they are well ahead of the learning curve than their competition, most notably "Rocket Lawyer", which is still a private company.
Further moves to increase profitability will be it's move to a subscription based business model, as well as a per document fee based model. If successful, they will be able to monetize not only their retail account base, but their seemingly loyal commercial base. Monthly subscription fees will grow both the top and bottom line if successful.
I think that LegalZoom has the potential to be a successful IPO. That being said, there are never any guarantees.
I like the price, the market value, and their business model. After the circus of Facebook and Zynga, this just might be one that I want to get in on.