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IPO Action: IPO Jockeys And Litmus Tests

|Includes:AMDA, INGN, KING, Lumenis Ltd. (LMNS), NMBL, SMLR, VRNS

Written By: John E. Fitzgibbon, Jr.

There are only two deals on this week's IPO calendar. Each has a message. One borrows from the wisdom of the racetrack. The other is a litmus test for what could be a wave of technology IPOs.

The advice around the betting window at the IPO Downs is: "If you don't know the horse, bet on the jockey." That applies to this week's first IPO.

The Jockey

Lumenis (LMNS - proposed) is an Israeli-based provider of medical and aesthetic lasers and light-based technology. Lumenis plans to price 6.25 million shares at $15 to $17 each on Wednesday evening to trade Thursday morning on the NASDAQ Global Market. Founded in 1991, Lumenis has about 1,061 employees. For the year ended Dec. 31, 2013, Lumenis reported net income of $17.4 million on revenues of $265.4 million. The joint-lead managers are: Goldman Sachs, Credit Suisse and Jefferies. The co-manager is: Wells Fargo Securities.

So far, so good.

But the last three medical equipment companies to go public stumbled on their first day on the IPO racetrack. (Note: All were priced over the last two weeks.) They were:

  • Amedica (AMDA) is a Salt Lake City-based provider of silicon nitride ceramic technologies for spine and joint implants for the orthopedic device market. Amedica priced its IPO of 3.5 million shares at $5.75 each on Feb. 12, cut from 3.2 million shares at $10 to $12 each. The IPO closed its opening day at $5.39, DOWN 6.3 percent from its initial offering price.

  • Inogen (INGN) is a Goleta, California-based provider of portable oxygen concentrators. Inogen priced its IPO of 4.4 million shares at $16 each on Feb. 13, on the low end of its price range of $16 to $18 per share. The IPO closed its opening day at $15.15, DOWN 5.31 percent from its initial offering price.

  • Semler Scientific (SMLR) is a Portland, Oregon-based provider of patented products that identify the risk profile of medical patients. Semler Scientific priced its IPO of 1.4 million shares at $7 each on Feb. 20, cut from 1.2 million shares at $12 to $14 each. The IPO closed its opening day at $6.99, DOWN 0.41 percent from its initial offering price.

Opening-day results like these won't make people run to the betting window with wads of cash.

The Goldman Rule

Now let's take a look at Lumenis' jockey - or bookrunner. It is Goldman Sachs, the first name on the cover page of the prospectus.

Labor Day was just six months ago. Since then, 126 IPOs have been priced, according to the U.S. Securities and Exchange Commission files.(Note: This excludes unit offerings consisting of common stock and warrants, closed-end investment companies and American Depositary Shares being offered for the first time in the U.S. capital markets that represent shares already traded on the companies' own national stock exchanges.)

Goldman Sachs was the bookrunner for 17 IPOs. Their opening-day results: 13 winners, three losers and one unchanged. Average gain for all 17 was 39.7 percent.

The rest of Wall Street: 73 winners, 29 losers and seven unchanged. Average gain for all 109 was 19.6 percent.

Put more simply, Goldman Sachs outperformed the Street by a ratio of about 2 to 1 in terms of average gain.

The Litmus Test

The buzz in recent weeks has centered around this theme: Technology IPOs are coming back in style. The second deal on this week's IPO calendar is from the tech sector. It's seen as the litmus test on how tech IPOs might fare in the near future.

Varonis Systems (VRNS - proposed) is a New York City-based provider of a software platform that lets companies manage and protect their unstructured data. This includes the user's spreadsheets, word-processing documents, presentations, audio files, video files, emails, text messages and any other data created by employees. This data often contains the user's financial information, product plans, strategic initiatives, intellectual property and numerous other forms of vital information.

Varonis plans to price 4.8 million shares at $17 to $19 each on Thursday evening to trade Friday morning on the NASDAQ Global Market. Founded in 2004, the company has about 573 employees. From the year ended Dec. 31, 2013, Varonis reported a net loss of $7.5 million on revenues of $74.6 million. The joint-lead managers are: Morgan Stanley, Barclays Capital, Jefferies and RBC Capital Markets. The co-manager is: Needham.

It has been over two months since a tech IPO was priced.

Nimble Storage (NMBL) is a San Jose, California-based provider of a flash-optimized hybrid storage platform. Nimble priced its IPO of 8 million shares at $21 each on Dec. 12, 2013. The price was increased from its original filing of $16 to $18 per share. The IPO closed its opening day at $33.93, UP 61.6 percent from its initial offering price.

The bookrunner: Goldman Sachs.

Tech Rush and Candy Crush

For the last several weeks, the financial press has been reporting that exotic technology companies have filed confidential plans to go public under the JOBS Act. Among those mentioned were: GoPro, a San Mateo, California-based brand of high-definition personal cameras used in extreme action video photography, and PubMatic, a Redwood City, California-based online advertising company.

On a formal note, the SEC has jumped into the act. Last week, the SEC reported some noteworthy filings by technology IPOs. Among them were: 2U (TWOU - proposed) a Landover, Maryland-based provider of cloud-based software-as-a-service solutions that enable nonprofit colleges and universities to deliver education to students anywhere; A10 Networks (ATEN - proposed) a San Jose, California-based provider of advanced application networking technologies that let companies, service providers, Web giants and government organizations accelerate, secure and optimize the performance of their data center applications and networks, and King Digital Entertainment (KING - proposed), the Dublin, Ireland-based maker of Candy Crush Saga, a popular (some say, addictive)interactive smartphone game.

Interestingly enough, not one technology IPO has made its public debut this year - until this week. The whole world is watching to see how the Varonis deal works out. If it pops, then technology will be "in."

Looking into next week, the calendar has one IPO. But more names could pop onto the IPO launching pad by the time that Monday, March 3, rolls around.

Stay tuned.

Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.

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