Trent Tillman

Research analyst, ipos
Trent Tillman
Research analyst, IPOs
Contributor since: 2011
Company: SyndicateTrader LLC
Often when an IPO just comes out it is hard to get a borrow on the stock for a period of time in order to short it. The time frame varies from a few days to a couple weeks.
The $15 price was the IPO price, and represents the 7.15M shares offered on the deal which were allocated to investors that indicated for shares through their brokers on the deal itself. THe majority of these sahres taypically go to institutional investors (ie mutual funds, hedge funds, etc) that have relationships with the underwriters. On a deal like this which was a "hot" IPO the price the stock actually trades at on the open is higher simply based on the aftermarket demand. In other words there are more orders to buy the stock on the open than there are sell orders from people that were allocated "deal" stock.
Books were about 15x oversubscribed and allocations of the deal stock were very small, so frankly I'm very surprised by the poor day one performance.
The idea was simply a trade around the secondary offering as the price dropped significantly going into the deal.
Unfortunately the system is not set up to benefit retail accounts, so on a "hot" deal (one which is multiple times oversubscribed) it is very hard for retail investors to get an allocation. The best shot to get an allocation as a retail investor would be to have a meaningful account (and it sounds like your account would qualify) with one of the lead underwriters. I.e. in this case your best shot would have been to get share through Morgan Stanley.
The 5x larger is from their roadshow.
It is bullish for the deal itself (ie day one performance) as it is an indication of strong demand. Like I mentioned in the article above only one (Metals USA) of the last 61 deals since the begginning of 2008 that priced above the indicated range opened below the IPO price. And only two deals did not close positive one day 1 (one was the deal just mentioned that opened below and the other was Skullcandy that opened with a premium but closed flat).
Priced an upsized 35M shares at $20.00...$2 above the range
The company plans heavy investment in marketing and branding through 2013...these expenses where not part of their 2010 or early 2011 numbers. You may be right that they are profitable in 2012, but my estimates are they will not be until at least 2013.
For some reason my original comment did not post, right after the stock opened...but basically to re-iterate...I can admit when I was wrong and the stock clearly has had a strong openeing performance relative to the pricing. Is the valuation relative to the peer group at this early stage justified? That is yet to be seen. If the company can execute on thier plan of implementing in 4500 practices then it more than likely will be justified. But based on the performance of the comps and the highly competitive aesthetic market, the jury is still out.
Yes, I did not disclose the potential conflicts associated with the distributor sales into Iran. I would point those interested to read the prospectus fully to get the company's clarification on that issue. My point solely is giving a brief company description and my opinion as to potential performance based on the IPO of the company. Sorry, if I in any way offended you by not going into detail on that associated risk, but this clearly is a brief article on the IPO of UBNT and not a full research report on the company.
I haven't done to research on EXTR to give much of any analysis, but one big difference I do see is in the expected growth rates. EXTR revenue estimates look like little or even negative growth in the next couple years, while UBNT is experiencing rapid growth for the foreseable future. As far as the patent infringements, don't all these companies experience potential infringements on a regular basis.
For FY 2012 (FY end June 30) my estimate is for approx $300M of revenue and EPS of approx 84c...and yes, post offering share count was approx 89.7 million.
My point was the people who were allocated shares on the IPO had the opportunity to sell up 25%+ during day one, while those looking to buy in the aftermarket better be careful.
Thanks Bill...right back at you as I have read a number of yours as well.
The two things not helping RENN still are the current valuation and the increasing talk of questionable accounting w/ many Chinese firms. It did not help that RENN adjusted some sub numbers just days before the IPO. While I do think that your entry level may be decent, unfortunately I don't see any catalyst to move the stock before the next earnings announcement.
Price range increased to $24-25, from original range of $20-22.
This is simply an offering overview. Further information is available to subscribers on my website syndicatetrader.com.
Shire PLC to buy Advanced BioHealing for $750M ahead of the IPO.
Great to catch that ..bad miss on my part...thanks.
Thanks for the insight into NQ, I'll dig more into it.
Unforturtunately on RENN I think there may still be some more downside, before it gets better. It may take some positive earnings announcement(s) to move the stock back up. There is so much bad press, in particular related to valuation. The problem is all the articles I see discuss the price relative to 2010 sales. Whereas Wall Street values based on the forward projections. And based on the growth, the valuation based on these forward estimates will look a lot more reasonable once the analysts are allowed to issue their reports (after the quiet period).
As far as LinkedIn, there are already plenty of arguements in both camps, but as far as the IPO itself it will be good. Whether the aftermarket performance is there is another story.
The paradox will shift, the question is when. Frankly part of the issue is these alot of these stock got ahead of themselves on a valuation basis. Unfortunately on RENN, I fear it may take a while....like a couple positvie earnings announcements.
Yes, the prospectus states that based on a commissioned report done for the company. So with 3648 current US stores (company owned and franchised), that would equate to 852 stores potential. But as in the quote it says "at least" 4500 total potential domestic stores. And the company has said they believe they have a potential for 1000-1200 additional stores.
Correct: "Founded in 2005, the company has grown rapidly through the offering of internet and mobile security products free of charge. They have grown their monthly active internet users from 122M in Dec. 2008 to 339M in Jan. 2011, representing a user penetration rate in China of 85.8%. They monetize this large user base through offering online advertising and internet value-added services."
I caught the reversed ratios and the correction has already been made thanks.
Yes, the overhang can obviously be a drag on the stock. But as far as the IPO sucesses, they may not have some of the recent successes of their peers, but IPO is not the only end result for these companies. Their GNC acquisition in '03 and sale in 2007 to Ares and Ontario Teachers is a good example where they made a great return without an IPO.
I concur!
Fair enough, as we all know these companies are valued on forward earnings estimates rather than trailing. However, annualzing fourth quarter estimates is not necessarily a fair gauge since there is seasonality in their performance as well.
Actually the P/E for 2010 of 8.2x reflects the pro forma earnings per share of $1.70 from the prospectus and the actual pricing of $14.00 per share. On an actual reported basis, the GAAP net income for 2010 was $74.1M or $1.89 per share. And on an adjusted net income basis the number for 2010 was $89.2M, which would equate to $2.26 per share (based on approx 39.3M shares), or a P/E of 6.19x.
The total price paid in '06 was about $33B, but that can be broken down to approx $21.3B and $11.7B of assumed debt. At the midpoint of the range, the pro forma Equity Value will be approx $40.25B, representing about $14.7B in Market Cap and $26B in debt. the cash put up to buy the company was only about $5.3B with the remainder coming from loans from Banks such as BofA, JPMorgan and Citi. The new owners have also been paid over $4B in dividends in 2010 and will receive a special divident of about $2B from this offering.
Thanks for the insights Carlin.