A Review Of Last Week's IPOs - Part VII

Includes: EXA, NOW, TSRO
by: The Value Investor

It took little over a month before the US public offering market became accessible again after the disastrous public offering of Facebook. This week I will review the initial public offerings for the week of June 25 to June 29.

Last week's IPOs

Three companies decided it was time to go public last week after not a single US company has gone public over the last month. Service-now.com (NOW), Exa Corporation (NASDAQ:EXA) and Tesaro (NASDAQ:TSRO) took the jump and got their listing.

On average the IPOs were a modest success. While Exa Corporation and Tesaro trade around their offering price, Service-now.com returned almost 37% on its first trading day. In total the sample above managed to raise some $350 million in order to finance their business objectives and growth plans, or provide existing shareholders with a cash out.


The public offering of Service-now.com was a great success. The offering price of $18 was above the initial guided offering range of $15-$17. Shares opened at $23.75 to end the day at $24.60, ending 37% above the offering price. The cloud-base service provider consolidates enterprise information technology into a single system. For the first three months of 2012 the company reported a 88% increase in net revenues to $47.4 million on which it reported a net loss of $5.6 million, compared to a profit of $3 million in the year before. Increased sales and marketing expenses put pressure on profitability and the company does not expect to be profitable for the entire year of 2012. Based on its current market valuation of $2.9 billion, shares are valued at roughly 15 times 2012's expected annual revenues.

Exa Corporation

Exa Corporation the provider of simulation software and services to vehicle manufacturers offered 6.25 million shares for $10 per share. A week ago the company and its underwriters hoped to sell the shares in the $11-$13 trading range. The company itself will sell 4.17 million shares to repay debt, make acquisitions and boost working capital, with the remainder of the shares being offered by selling shareholders. For the first three months of 2012 the company reported an 11% increase in revenues to $11.3 million on which it broke even. Shares ended their first day as a public company at around $10 per share, but rose more than 8% in a late Friday afternoon rally, ending the week at $10.61

Tesaro Corporation

The biopharmaceutical company which was founded only two years ago sold 6 million shares at $13.50, the midpoint of its indicated offering price range of $12-$15. Shares did manage to end their first trading week with modest gains, closing at $13.99. The company focuses on the development of treatments of cancer. Besides research in treatments which aim to target and destroy tumors, the company also focuses on the prevention of side effects of chemotherapy such as nausea and vomiting. The company has hardly any operating history yet and until now has not generated any revenues.


It took little over a month before the first companies went public again after the disastrous public offering of Facebook (FB). This week three companies went public and notably the public offering of Service-now.com was a great success. Still the limited size of the offerings in combination with the few listings indicate that the confidence in the public offering market has not returned entirely yet. Highly volatile markets on the back of the continued worries over the euro zone and slowing growth in China and the US do not indicate much good for the public offering market in coming weeks.

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

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