Pops and Flops: The Last Word on These 5 IPOs

John Fitzgibbon |

Wall Street Stock MarketLast week's IPO opening-day performances read like a book. All you needed to know on how well or how poorly your favorite IPO will trade is found on the cover of its final prospectus. But nobody gives you anything on Wall Street - you have to do your own work.

Check the final pricing terms of your favorite IPO with the most recent filing found in its preliminary prospectus. Following this advice would tell you all you needed to know about last week's market.

The IPO calendar produced five deals - one priced above its latest filing terms, two within and two below.

Not surprisingly, one popped, two struggled and the other two flopped.

The Pop

Imperva (IMPV), based in Redwood Shores, California, was formed in 2002 to provide data security solutions.

J.P. Morgan and Deutsche Bank Securities priced 5 million shares at $18 each, UP from its most recent filing range of $14 to $16 per share. The IPO started trading on Wednesday morning at $23, closed its opening day at $24, and ended on Friday at $28.40 -- UP 57.8 percent from its initial offering price.

Conclusion: If a deal is priced above its recent filing range, expect a pop.

The Flops

Chesapeake Granite Wash Trust (CHKR), based in Austin, Texas, is an investment trust formed recently to own royalty interests in horizontal oil wells located in Washita County in western Oklahoma.

Morgan Stanley and Raymond James priced 23.4 million shares at $19 each, on the low end of its $19 to $21 per share filing range. The IPO started trading on Friday morning at $19 and closed its opening day at $18.87, DOWN 0.68 percent from its initial offering price.

Conclusion: If a deal is priced on the low end of its filing range, don't expect a moonshot in the aftermarket.

Selway Capital Acquisition (SWACU), based in Englewood, N.J., is newly formed blank check company.

Aegis Capital and Chardan Capital Markets priced 2 million units at $10 each, BELOW its recent filing of 2.75 million units. The IPO started trading on Tuesday morning at $10 and closed its opening day at $9.95, DOWN 0.5 percent from its initial offering price.

Conclusion: If a deal is priced below its recent filing range, expect a flop.

The Strugglers

LRR Energy, L.P. (LRE), based in Houston, is a limited partnership created recently to operate, acquire, exploit and develop producing oil and natural gas properties in North America.

Wells Fargo Securities priced 9.41 million shares at $19 each, on the low end of its $19 to $21 per share filing range. The IPO started trading on Friday morning at $19.20 and closed its opening day at $19.05, UP 0.26 percent from its initial offering price.

Conclusion: If a deal is priced on the low end of its filing range, don't expect a moonshot in the aftermarket.

NewLink Genetics (NLNK), based in Ames, Iowa, was formed in 1999 to focus on discovering, developing and commercializing novel immunotherapeutic products, including drugs to treat some of the most intractable types of cancer.

Stifel Nicolaus Weisel and Canaccord Genuity priced 6.2 million shares at $7 each. That was below its recent filing of 5.5 million shares at $10 to $12 each. The IPO started trading on Friday morning at $7 and closed its opening day at $7.08, UP 1.14 percent from its initial offering price.

Conclusion: If a deal is priced below its recent filing range, expect a flop.

Note: This was an exception. The deal was priced at $7 per share, down from $12, the high end of its filing range. In cases with a sharp price reductions, you can expect what the Street refers to as a "dead-cat bounce."

On to the Future

This week has nine IPOs on the calendar expecting to raise $1.5 billion. Everybody has an opinion on how well or how poorly each might trade, but one can use an edge.

All you need to know on how well or how poorly your favorite IPO will trade is found on the cover of its final prospectus.

Yes, it's true. The last word on any IPO is hiding in plain sight.

Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.

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
RIO25 Rio Tinto Finance (USA) Ltd 3.75% Gtd Nt 2025 n/a n/a n/a 0
CHKR Chesapeake Granite Wash Trust representing benefic 2.23 -0.08 -3.26 247,244
IMPV Imperva Inc. 36.40 -0.45 -1.22 758,673

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