Despite Some Problems, This Is One Hot IPO Market (BNNY, MM, GRPN, GWRE, BCOV, DWRE, GRPN, RPAI, NRKM)

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If you were not sure about the IPO market being hot, you better take note.  PWC has issued its first quarter review and the market is hot.  Last week had about ten offerings in the most IPO week in some time.  Annie’s, Inc. (NYSE: BNNY) scored a near double-digit gain from its IPO price after the organic foods company went from hot to scorching.  Millennial Media Inc. (NYSE: MM) was briefly trading at a 100% gain last week from its $13 pricing for its mobile advertising platform.  Other key IPOs are still way up from their offering price as well.

Guidewire Software, Inc. (NYSE: GWRE) came public in January of this year and is leading the gainers with a $13 IPO price and shares are now almost at $30 after seeing s $38 high print.  Brightcove, Inc. (NASDAQ: BCOV) provides cloud-based solutions for publishing and distributing professional digital media and its shares are still up over 100% from its $11.00 IPO price.  Even Demandware, Inc. (NYSE: DWRE) is up almost 90% from its $16.00 for its software-as-a-service e-commerce solutions.

Groupon, Inc. (NASDAQ: GRPN) may have taken out some sizzle from several issues today, but the numbers speak for themselves and we had been very cautious on the Groupon offering based upon valuation and some metrics inside the offering.  The second quarter IPO numbers are likely to be very skewed due to the coming Facebook IPO, but here are some stats from the first quarter alone to show just how much this market has grown in the U.S.:

  • 44 IPOs raised $5.8 billion in proceeds, up 33% from the 33 pricings in the first quarter of 2011.
  • The trend towards smaller IPOs seems to he helping the demand and the results as the average IPO size was down by 67% to $131 million from $395 million in the first quarter of 2011.
  • The VIX measuring overall market volatility fell by 40% from the second half of 2011; lows seen were in March and had not been seen since June 2007.
  • Technology had 13 and tech rules in IPOs for investors, while industrial and financial services each had 9 IPOs.
  • Some 36 of the 44 IPOs were backed by financial sponsors.

What is interesting is that all of the hot IPO activity appears to be in the United States.  It seems ironic that one of the world’s most mature markets is outpacing the emerging and largely developed markets.  Still, we all read the international headlines and that is weighing on overseas opportunities for such offerings.

Two IPOs we will be watching this week are the $350 million offering from Retail Properties of America (ticker will be RPAI) as the third largest shopping center REIT in America, followed by a $130 million or so offering from Enerkem (ticker will be NRKM) which converts municipal waste into cellulosic ethanol in North America.

Private equity backers have now even filed to bring Michael’s Stores public in a $500 million IPO again. Stay tuned, Facebook will make the second quarter likely look massive compared to other quarters.

24/7 Wall St. would like to propose one issue with the SEC and also with the NYSE Euronext, Inc. (NYSE: NYX) and NASDAQ OMX Group Inc. (NASDAQ: NDAQ): Would it be too much to ask for NYSE to go back to Three-letter and under and making NASDAQ-listed shares have Four-letter tickers again? 

JON C. OGG

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