Playing the IPO Market: A Coupon Play That Just Isn't Cheap

Francis Gaskins |


In this week's interview with Francis Gaskins, Director of Research for, we discuss the slate of public offerings set to hit the market. 

Gaskins has been recognized by major financial media outlets such as Forbes, CNBC, Bloomberg, and many others as 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 here.

EQ: During the period between June 1 through July 3, 38 companies made initial filings to the SEC for their IPOs. You said that it seems like they were all trying to get in before the institutional vacation period. Is this an annual phenomenon?

Gaskins: Yes, institutional investors won’t go to road shows from about the first of August until after Labor Day.  Same thing happens from early December until sometime in mid-January.

EQ: This week, we have seven IPOs on schedule. There’s the NRG Energy spin-off with NRG Yield. What’s the story with this new vehicle?

Gaskins: NYLD Yield ($NYLD) is a shell vehicle to pass dividends to investors generated from renewable and conventional generation and thermal infrastructure assets, ultimately owned by NRG, which has a market cap of $8.9 billion.

NYLD’s annualized dividend is expected to be 6 percent, with 20 percent growth in dividends by the end of 2014.  

A new Califorina Vally Solar Ranch ($CVSR) facility is expected to be online in October, 2013, and is expected to make substantial contributions to cash flow.

EQ: One surprising name is RetailMeNot ($SALE), which is a coupon site company. Is the company really worth $1 billion?

Gaskins: SALE is in the digital coupon business, where there are no barriers to entry.  Digital coupon competitors include Groupon (GRPN) , LivingSocial, OpenTable (OPEN) ad many others.


SALE’s revenue growth was flat, comparing Q2’ 13 with Q1’ 13:  that’s a very bad sign.  Even worse, profit declined 39 percent, comparing Q2’ 13 with Q1’ 13.

Other red flags include:  half of the stock being sold is by VC’s and insiders; $52.5 million of SALE’s IPO proceeds will be used to pay accumulated and unpaid dividends.

The short answer is no, based on comparative financial fundamentals.

EQ: Are there any other names that stand out to you in next week’s group of IPOs?

Gaskins: Based in Las Vegas, Nevada, Diamond Resorts International ($DRII) scheduled a $264 million IPO with a market capitalization of $1.2 billion at a price range mid-point of $17, for Friday, July 19, 2013.

DRII calls system wide timeshare sales via points VOI’s (vacation ownership industry).  VOI’s  accounted for 57 percent of revenue for Q1 ’13, including financing the percent of VOI revenue was 72 percent for the 12 months ended March 2013.   Hospitality and management services accounted for 28 percent of revenue.

Although not exactly apples and apples, compared with HomeAway ($AWAY) DRII seems priced at a discount.  And while there is increasing competition in the network timeshare via points marketplace, DRII has a large network with very active sales offices.  

As long as the economy doesn’t tank DRII should be able to increase revenue.

Based in San Jose, CA UCP ($UCP) scheduled a $125 million IPO with a market capitalization of $292 at a price range mid-point of $16, for Thursday, July 18, 2013.

UCP is a land developer and homebuilder.  It controls over 5,000 homebuilding sites, which is say provides visibility for eight years of operations, based on the sales for the 12 months ended March, 2013.  UCP is a carve-out from PICO Holdings (PICO) , $507 million market capitalization.  

UCP expects to IPO at a price-to-book discount from other homebuilders that have IPO’d this year, but is priced at a price-to-sales premium because 64% of Q1 ’13 revenue is land sales, rather than home and land sales.

UCP expects to sell 43 percent of the company on the IPO, which is a large percentage and suggests if UCP has to come back to the public market current investors may be diluted more than they expect.

Based in Redwood City, CA, OncoMed Pharmaceuticals ($OMED) scheduled a $60 million IPO with a market capitalization of $395 million at a price range mid-point of $15, for Thursday, July 18, 2013.

OMED targets cancer stem cells (CSC), which is different from conventional chemotherapies and targeted therapies.  By targeting cancer stem cells OMED hopes to prove in can put the cancer cells to sleep, which an be considered ‘curing’ the targeted cancer.

OMED has five anti-CSC product candidates in clinical development and has treated an aggregate of 235 patients across all of its clinical trials.  All of OMED’s product candidates were discovered internally in OMED’s own research laboratories.

Major collaborators include GlaxoSmithKline (GSK) , which has a $128 billion market cap  and Bayer (BAYRY) which has an $89 billion market cap.

A similar company, Verastem (VSTM) doubled in the past month after two major announcements.

The complete IPO calendar is here.

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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
AWAY HomeAway Inc. n/a n/a n/a 0
DRII Diamond Resorts International Inc. n/a n/a n/a 0
FGBI First Guaranty Bancshares Inc. 17.21 0.00 0.00 0
GRPN Groupon Inc. 5.25 -0.07 -1.33 8,225,481
NYLD NRG Yield Inc. Class C 15.53 -0.28 -1.74 242,864
OMED OncoMed Pharmaceuticals Inc. 9.70 -0.05 -0.51 116,403
PICO PICO Holdings Inc. 12.14 -0.02 -0.16 13,676
SALE RetailMeNot Inc. 9.60 -0.15 -1.54 59,625
UCP UCP Inc. Class A 8.50 -0.20 -2.30 16,403


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