Playing the IPO Market: Getting In Before the Party Ends

Francis Gaskins |

Francis Gaskins, President and Editor of IPOdesktopIn this week's interview with Francis Gaskins, Equities.com discusses some of the best recent performers and takes a look at what set them apart from the laggers. Gaskins also sheds some light on the anticipated frenzy of IPOs on the way while the market is still hot. 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: Perhaps the most successful IPO from last week’s busy schedule was ChannelAdvisor (ECOM) and Global Brass and Copper Holdings (BRSS). As a whole, we saw some mixed reactions with the other debuts. What was your takeaway from this week’s action?

Gaskins: Companies with internally generated top line revenue growth, such as ECOM, are in hot demand. We had a buy on ECOM, +33%

On the other hand, leveraged buyouts that struggle generating meaningful top line revenue increases often have to be priced down from the original price range, such as BRSS and Constellium Holdco B.V. (CSTM).

BRSS had a nice ‘dead cat’ bounce after being priced 31% below the original mid-range mid-point and was up 18%. CSTM was down a little over 1% after being price down 17% from the original price range mid-point.

However, a leveraged bought out company such as Ply Gem (PGEM) that is in a good sector such as housing can generate investor demand -- even though PGEM is a profitless company. In spite of PGEM’s poor financials we had a buy on PGEM and it was up 12%.

Biopharma companies have to be looked at on a case-by-case basis. For example, Portola Pharmaceuticals (PTLA) priced mid-range and was up 11%. Alcobra Pharmaceuticals (ADHD) priced below range and went down 9%. We had a buy on PTLA and an avoid on ADHD.

EQ: Currently, there are two IPOs scheduled for the coming week with Kamada Ltd. And Epizyme, Inc. What are your thoughts on these two names? Are there any others worth watching closely?

Epizyme (EPZM) is targeting relief from leukemia by putting it into remission, and is in Phase 1-2 clinical trials. EPZM has raised $120 million from strong collaborators and also has strong VC firms as investors. EPZM’s accumulated deficit is only $60 million, low for a biopharma company. It’s price-to-book value, however, is on the high side.

Kamada already trades on the Tel Aiv (Israel) stock exchange, so it is technically not an IPO.

The full IPO calendar is here.

EQ: In our last interview, you touched on a few examples of dull companies trying to access a buoyant IPO market. As we approach the second half of 2013, and concerns of market conditions potentially softening increasing, could this entice more companies to expedite the process of going public before the IPO party starts to wind down?

Yes, and in the last week 13 companies filed initial S-1 statements. Based on recent experience we can expect most of them to IPO (if they can) by mid-July or sooner.

EQ: We know that housing IPOs is a hot area right now. Are there any other industries or sectors in the market that you anticipate activity to increase?

Gaskins: Subscription-based cloud software companies with good top line revenue increases are always in demand.

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. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BRSS Global Brass and Copper Holdings Inc. 28.40 0.05 0.18 49,693
PGEM Ply Gem Holdings Inc. 15.25 0.05 0.33 84,057
ADHD Alcobra Ltd. 1.84 -0.01 -0.39 29,085
PTLA Portola Pharmaceuticals Inc. 18.06 0.74 4.27 266,716
EPZM Epizyme Inc. 10.60 0.10 0.95 90,217
CSTM Constellium N.V. 6.33 -0.03 -0.39 198,044
ECOM ChannelAdvisor Corporation 13.95 0.25 1.82 22,116
CAH Cardinal Health Inc. 71.36 0.43 0.61 1,070,095

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