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During the IPO season Francis Gaskins, editor of IPOdesktop.com & director of research for Equities.com, regularly appears on CNBC TV, Bloomberg, thestreet.com & other financial cable channels. On the day of the Visa IPO he appeared on four cable TV financial shows including Bloomberg... More
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  • Skype-hype from eBay & more about the IPO market 0 comments
    Apr 17, 2009 1:19 PM | about stocks: RST, BPI, APEI, APOL, BBBB, CECO, COCO, CPLA, DV, EDU, ESI, LINC, LOPEQ, STRA, SYMC, CYOU, EBAY, BKS, AMZN

    Skype-hype from eBAY & the IPO Market
    (1) EBAY’s Skype-hype, not seen since Google
    Skype-hype message to Wall Street – eBay focuses on core business
    . Top line revenue -- because of encroachment  by Amazon & others.
    . Balance sheet -- to convert a soft asset into hard dollars
    eBay is pre-conditioning the IPO market, very much pre-IPO.  Similar to what Google did.  That ploy only works for large, heavily branded companies, who can get away with it, not smaller emerging companies.

    WHAT DOES SKYPE-HYPE MEAN?
    When a well-known force (eBay) starts to pre-condition the IPO market for a division spin-off -- in what is basically an IPO vacuum -- then that’s a sign of an expected much stronger IPO market.

    (2) Three successful IPOs this month, and all are up
    ROSETTA STONE
    . Popped 40$ yesterday, up again today
    . Generates good cash flow, public market segment leader
    . Understandable growth plan includes overseas expansion – 95% of sales now are in the US
    . High branded consumer awareness

    BRIDGEPOINT EDUCATION
    . 30% haircut in IPO price, rose a little from reduced IPO price
    . Lots of sector headwinds in the post-secondary online education market segment
    . Questions about the market leader Apollo (APOL) accounting practices sunk the segment since Feb 1
    . APOL itself touched almost $90 in early Feb then sank to almost $60 this month.
    . The bloom is off the rose in the online post secondary education sector

    CHANGYOU
    One trick gaming pony from China
    Underpriced IPO at 7 times earnings

    (3) IPO SIMILARITIES – all three are
    . Profitable
    . Generate positive cash flow, which means they are not crippled by too much interest and/or overhanging debt re-financing problems
    . Computer-related
    . Have high gross margins: Changyou (93%), Rosetta Stone (87%), Bridgepoint Education (71%)

    (4) IN GENERAL, WHAT DOES IT MEAN?
    Investors are now very much aware of IPOs, especially because of Rosetta Stone’s success and because of eBay’s ‘Skype-hype”

    Up until sometime in March many investors simply did not want to hear about IPOs.  But if investors think they can look forward to getting in on a potentially ‘in demand’ (hot) IPO from Skype then they will also look at other IPOS in the meantime.

    (5) IPO CRITERIA
    Right now (and this applies to Skype, also) a successful IPO appears to need
    . High gross margins
    . Top line revenue increases going into the IPO, with a believable growth plan for top line revenue
    . Profits
    . Positive cash flow
    . Very little overhanging debt

    In other words, back to basic investing principles.  Because ‘pie in the sky’ dreamy prognostications.have no credibility in this market.

    (6) IPO PIPELINE
    . Not too much in the pipeline right now
    . However, there are many companies standing outside & looking into the IPO window.   Those that have a good March quarter and meet the above criteria (#5 above) may be able to step through the window and actually IPO
    .  If their March quarter numbers good and if they push it, it is possible qualified companies can IPO by the end of the second quarter, June 30, 2009 or shortly thereafter.
    . The summer IPO season ends the second week in August, so I expect to see some interesting IPO filings in the next month or so.

    Disclosure:  no positions

     

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