Many investors are amazed by the new generation of companies that are going public. LinkedIn, Bankrate, Dunkin shares raised more money than their expectations. The big names such as Groupon, Twitter and of course Facebook are seducing investors from all walks of life. However, there are the others who think that the second dot-com bubble is around the corner that might be similar to the 2000's .
Let’s look at some of these IPO’s which are making the headlines these days.
BANKRATE (RATE) Contrary to the common belief this is not a pure dot-com company. It was founded 35 years ago. Bankrate was founded as a printed financial and market data research business. The company began to move online in 1996. Most of Bankrate's revenues come from display advertising, performance-based advertising and lead generation. The financial statement for the first quarter showed that the revenues nearly tripled to $99.1 million with a net income change to $5.1million. The company had a net loss of $5.2 million just a year ago. One might easily find certain drawbacks to this business model such as heavily dependence on search engines to direct visitors. Another big threat around the corner is that the search engines such as Google, MSN which have already came up with a similar service where comparisons of mortgage, credit card and deposit interest rates are available on their websites.
PANDORA (P) radio is a great venture. However, many analyst pronounce this company as a misplaced IPO. The very reason for this is the “competitive environment” that Pandora is operating. Competitors such as Sirius XM and CBS's Last.fm (which I am a fan) are seriously backed companies. Additional to that, Google and Microsoft are speculated to come out with their own online version of radios. As of today Pandora has 36 million active monthly users. The company has a market cap of over $2.8 billion. Total revenues in January 2011 rose to $137.8 million from $55.2 million a year ago. In its outlook for 2011 the company projects a revenue increase of 30% with a bullish outlook.
NIELSEN (NLSN) is an audience measurement and global information company which serves television and other media measurement, online intelligence, mobile measurement, trade shows and related properties.
As of today, Nielsen has a presence in approximately 100 countries. In the first quarter of 2011 Nielsen recorded a net loss of $181 million compared to a $43 million of net income in the first quarter of 2010. EPS for the most recent quarter was -$0.55. The earnings for the trailing 12 months was $348 million in cash with a net loss of $94 million. Despite all the facts company was able to raise $1.6 billion from the offering. Proceeds from the initial public offering were used to pay-off companies $1.75 billion debt. The company is on the track to innovate itself by entering into a strategic alliance with MyWebGrocer to measure U.S. online supermarket sales.
ZYNGA (ZYNG) The online game platform company has wide recognition by Facebook users. One might ask what does Zynga do? Well, if you are one of the 232 million active players of online games such as FarmVille, CityVille or Zynga Poker than you should also know that Zynga is the company behind them. In its recent IPO, Zynga plans to raise as much as $1 billion in capital but it is also speculated by major news networks that the offering could raise as much as $2 billion. However with all the brag about Zynga there are some major downsides to this business model such as:
1) Over-dependence to third-party companies.
2) Their game traffic is hosted by a single vendor, it is the Amazon.com.
3) Zynga's IPO S-1 filing states that their business heavily depends on Facebook. That's another big threat because their dependance is on a limited number of players for nearly all their revenue. Zynga is expected to turnover 10% of Facebook’s revenue or roughly $400 million in 2011. These numbers are based on the estimation of Facebook's expected revenue of $4 billion in 2011. So what is the risk? Simple, if companies like Facebook decides to launch its own gaming platform, Zynga might sing the blues. Lately, Zynga is seriously considering to expand its services into the Chinese market with an online-chinese version of Cityville.
DUNKIN DONUTS (DNKN) offered its shares to public with a new record.The stock was up 47% just! on its first day of trading. The dominance of the company's product in the Northeastern U.S. is huge. Dunkin Chain has a 52% market share of all breakfast visits and a 57% market share of all the coffee served up by quick service restaurants. Approximately 60% of the company's sales in 2010 were coming from hot&cold beverages. In 2010, Dunkin brands earned a revenue of $577 million with a growth of %7.3 year over year. In its recent IPO, Dunkin(DNKN) shares were offered at $19 more than the expected price of $16 to $18 a share. The company sold $422 million worth of stock in its market debut. This put Dunkin Brands a price tag of $3 billion. Even with all the positive numbers out there there seems to be a number of reasons to be a little cautious on this one. The main reason for this is the huge debt load that the company has. The holding companies Bain Capital, The Carlyle Group and Thomas H.Lee Partners paid $2.4 billion to buy the Dunkin Brand in 2006 mostly through borrowed cash which ended up being Dunkin’s debt. A spectacular stock performance is mostly associated with relative earnings growth. That’s what exactly Dunkin should be working on more than anything else. Increasing earnings...
Starting from 2007 IPO's saw the steepest declines. However, 2010 was a strong year where the economy rebounded and foreign companies came back with their new offerings. A slew of new IPO offerings such as Groupon , Facebook , Twitter will show investors if their investment is worth all the fuss or if we are ready to see another episode of “Where are they now” in the upcoming years.