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Playing the IPO Market: What Chances Does This Niche Retailer Have?

By  +Follow June 10, 2013 9:43AM
Tickers Mentioned:


In this week's interview with Francis Gaskins, Equities.com discussesthe fall and current state of the Chinese IPO market, companies going public this week, and one niche retailer that is planning to do so in the near future. Gaskins has been recognized by major financial media outlets such as Forbes, CNBC, Bloomberg, and many othersas one of the best resources for the IPO industry available today. Gaskins is a highly sought-after expert for his insights and opinions as an IPO analyst. Readers can see his previous weekly interviews with Equities.com here.

EQ: This week, LightintheBox (LITB) debuted on the Nasdaq on Thursday. Shares jumped considerably from the offering price of $9.50 per. What were your thoughts on this IPO?
Gaskins: If LITB has a good June quarter after its first profitable quarter, which was March ’13, then the stock should do well.  It’s trading like it wants to go higher, which suggests the June quarter may show a profit.  And by now the IPO flippers are all out of their stock.

EQ: LITB was also the first Chinese IPO this year, which underlines just how much that market has dried up the last two years. But the last three or four Chinese IPOs have fared well. Does this help to remove the stigma that hurt this market over the past several years?

Gaskins: The stigma is because all Chinese IPOs have to IPO using a shell type structure, typically in the Cayman Islands, while the actual operating companies are ‘protected’ back in China.  Also, there have been numerous accounting issues with Chinase IPOs.

A lot of the stigma came because smaller investment banker firms brought questionable Chinese companies public, without regard to quality.

Now, it’s very important to look at the lead underwriters, because they are putting their reputation on the line by underwriting Chinese IPOs.   I think the market is gaining confidence in the bigger underwriting firms that are doing the Chinese IPOs.  At this stage, we’d shy away from any Chinese IPO underwritten by a non-major investment banking firm.

EQ: There are three IPOs scheduled for next week with Coty (COTY), Gigamon (GIMO), and Aratana Therapeutics (PETX). What are you expecting here?
Gaskins: COTY is a smaller competitor to L'oreal S.A (OR), Estee Lauder (EL) and Avon Products (AVON).  COTY’s financial record shows spotty profitabilty trends.  They do intend to IPO at  a P/E discount to segment competitors.  COTY has a negative price-to-tangible book value, which suggests it’s been stripped of cash by its leverage buy-out owners.
100% of the proceeds are going to selling shareholders, which isn’t a positive.   We expect COTY to be OK, not great, in the IPO aftermarket.

Gigamon, on the other hand, is our IPO pick of the week because of increases in top line revenue.  GIMO has identified a specialized niche in switch traffic management & reporting, and appears for the time being to have a niche jump on its larger competitors, which include Cisco Systems (CSCO), Juniper Networks (JNPR) and Brocade Systems (BRCD).
GIMO was profitable in 2010, 2011 and 2012.

For Aratana Therapeutics, since its founding in 2010, it has licensed three compounds, and is  developing into six products for use in pets in the United States and Europe.
Potential competitors include large animal health companies, such as Merck Animal Health, the animal health division of Merck & Co., Inc.; Merial, the animal health division of Sanofi S.A.; Elanco, the animal health division of Eli Lilly and Company; Bayer Animal Health, the animal health division of Bayer AG; Novartis Animal Health, the animal health division of Novartis AG; Boehringer Ingelheim Animal Health, the animal health division of Boehringer Ingelheim GmbH; and Zoetis, Inc.

Aratana is currently conducing clinical studies, and then plans to conduct clinical trials, so it appears that revenue generation is a long way off.  We believe PETX will price below its initial range.

EQ: There are also reports that retailer The Container Store is planning to do an IPO soon. Does this niche company have much potential to grow?

Gaskins: The Container Store is a specialy reatailer that created the storage and organization retail category in 1978.  They have 64 stores now, and several years ago had 49 stores, so the annual store opening growth rate isn’t very high.

They have only 10 stores in California and 13 in Texas, where they are headquartered.  They are in 22 states plus D.C., so it looks like they’ve cherry picked their locations (makes sense).  
Their stores are about 25,000 square feet, which is a little more than half an acre.    If they are going to grow meaningfully, then they may have to downside their store size to get to smaller communities.   And once their S-1 is filed it will be interesting to see what percentage of revenue is generated from online activity.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for LITB
China Stock Research
19 Dec 14 12:58:29
Forget Wal-Mart: China Cuts Out the Middleman http://t.co/dt5UjDtoKB $BABA $LITB But quality control...such a huge challenge
19 Dec 14 11:48:05
$LITB - Securities Registration: Employee Benefit Plan (s-8) http://t.co/vM9Wp90X4D
Stocks News&Markets
19 Dec 14 11:48:04
$LITB - Securities Registration: Employee Benefit Plan (s-8) http://t.co/SPfveIr7hT
19 Dec 14 07:36:57
Ex-CEO of $WMT joins $ECIG BOD. 400% upside target of $0.50 $TINO $BZTO $LITB traders read: http://t.co/RB85WZsWYu http://t.co/xi3978GuDs
18 Dec 14 07:54:58
$ECIG breakout up 20%. 400% upside buyout target of $0.50 $TINO $BZTO $LITB traders read: http://t.co/xi3978GuDs
18 Dec 14 06:53:08
$LITB http://t.co/xWivukTQqL
18 Dec 14 05:06:15
$LITB - The Rosen Law Firm, P.A. Announces Proposed Class Action Settlement on Behalf of Purchasers of American http://t.co/tq0F84uGcQ
Stocks News&Markets
18 Dec 14 05:05:10
$LITB - The Rosen Law Firm, P.A. Announces Proposed Class Action Settlement on Behalf of Purchasers of American http://t.co/UyzrXap3Ez
17 Dec 14 15:28:24
@stockstobuy you still like $LITB?
Stocks News&Markets
17 Dec 14 12:46:03
Tim made $10,483 on $LITB -Check it out! http://t.co/GpPR5G0b1k Learn #howtotrade http://t.co/axK8SMSgo9 $DRIV $XNCR $XNY $TEU $ONDK
17 Dec 14 11:30:02
$ECIG buyout target of $0.50. 400% upside. Positive EBITDA and $200MM revenue in 2015 $TINO $BZTO $LITB traders read: http://t.co/xi3978GuDs
17 Dec 14 07:43:08
$BABA for leaving that daily flag behind $RPTP $LITB $DSKY $CLNT
17 Dec 14 02:28:02
$LITB: LightInTheBox Extends Share Repurchase Program http://t.co/HQBpsQMDhp http://t.co/CxX32yDyzu
China Stock Research
16 Dec 14 18:08:15
$LITB extends buyback term, had $14MM left at the end of Q3 http://t.co/hpl22Or7IR
16 Dec 14 15:20:02
$LITB the bear pattern is confirmed & a SHORT signal is issued @ http://t.co/hVcSGWn2fL. Short Level: 6.0400 Target: 5.5568
16 Dec 14 12:53:35
Play the stocks that are moving ... !? $RPTP $DSKY $LITB $CLNT
Scarface Trader
16 Dec 14 06:16:09
$LITB http://t.co/NkIfmCzFhv
16 Dec 14 05:18:08
RT @Briefingcom: $LITB: LightInTheBox Holding announced that its Board has authorized to extend its existing share repurchase... http://t.c…
16 Dec 14 05:16:55
$LITB: LightInTheBox Holding announced that its Board has authorized to extend its existing share repurchase... http://t.co/8AQo1Tesr1
16 Dec 14 03:21:02
$LITB: LightInTheBox Extends Share Repurchase Program http://t.co/IQP5caHVKB http://t.co/TXVvL3tSQe
Leopoldo Sanchez
16 Dec 14 03:17:24
$LITB LightInTheBox extends share repurchase program for additional twelve months
16 Dec 14 03:15:07
$LITB: LightInTheBox Extends Share Repurchase Program http://t.co/oVH0FIOw85 http://t.co/1ka60KxqIc
16 Dec 14 03:08:03
$LITB: LightInTheBox Extends Share Repurchase Program http://t.co/luy0IjJiI6 http://t.co/MGSAN473OH
16 Dec 14 03:05:05
LightInTheBox : Extends Share Repurchase Program http://t.co/3GdvffKnIl $LITB
Stocks News&Markets
16 Dec 14 03:03:17
$LITB - LightInTheBox Extends Share Repurchase Program http://t.co/fscXZrOLFS
16 Dec 14 03:03:11
$LITB - LightInTheBox Extends Share Repurchase Program http://t.co/v1wFRuSJQD
Scarface Trader
15 Dec 14 18:35:20
$LITB has shown relative strength during the last few trading days of meltdown. Will rip if the market has a good day or 2
China Stock Research
14 Dec 14 22:25:41
@Neil_Flynn $JMEI lawsuit news is noise. $LITB went through sthg similar. They'll eventually settle, lawyers get paid, shareholders zip
12 Dec 14 14:58:42
$LITB may go down 8% if the bear pattern is confirmed. Chk confirmation [80%] @ http://t.co/hVcSGWn2fL. Short level:6.0500.
Trade Under Ten
12 Dec 14 11:02:06
$VG cross its 50MA...similar looking chart pattern to $LITB http://t.co/THVC3uScpv
12 Dec 14 10:09:32
12 Dec 14 10:00:26
$LITB $6.44 break will be nice
12 Dec 14 09:58:17
$LITB :)
By  +Follow June 10, 2013 9:43AM



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