IPOs, secondaries, emerging cos

LogMeIn's IPO's current price range a clear discount...

2009-06-30T11:29:00.000-07:00

See ‘compare & contrast’ in pre-IPO report below. LOGM compared with other on demand software companies including Salesforce (CRM), Netsuite (N), SuccessFactors (SFSF)

LOGM Pluses
. 5 sequential quarters of increasing top line revenue
. Recurring revenue base with 80% renewal rate
. high gross margin, net profit margins increasing on a quarterly basis
. Less expensive customer acquisition model than major competitors
. High rate of customer acquisition

Negatives
. Relies on a combination of copyright, trade secret, trademark and other rights
read more in pre-IPO report
http://gaskinsco.com/linkto-logm.shtml

OpenTable 'over the top'

2009-05-22T07:19:00.000-07:00

OpenTable (OPEN)
+60% close = at this stage 'over the top'
. IPO Priced at $20
. 54% more than the original range mid-point of last week
. raised $60mm
. trading Thursday, May 21
. Current price OPEN

IPO report updated with 1st day's close IPO report

> either the below or it's such a small offering ($60mm) that the trading is/could be about over enthusiastic 'diner-investors' getting nailed by funds who are bailing out of the IPO.
------------------
Or perhaps
> It's about defining & leading a growing market in the US at least, and about recurring revenue. On a comparative basis Salesforce.com (CRM) is the best-known recurring revenue high multiple Internet model. It's a mature company with a trailing 12 months P/E of 113 or so.

but OPEN is defining a growing emerging market, has no apparent competitors that are at the same scale at least in the US, and has constructed some formidable entry barriers to competition such as 10,000 restaurant clients & 3mm reservations for the March 09 quarter.

And once the economy levels & and starts to grow, then OPEN's growth rate should pick up. In climate of very visible restaurant closings, it's surprising that OPEN generated a 5 quarters of sequential growth in top line revenue.

What happened here is they picked up market share and may have emerged as the major leader to whomever is second in their marketplace.

> Investors are very much attracted to the recurring top line revenue growth generated by OpenTable. Recurring revenues are like the IPO ‘mother lode’ or ‘holy grail’ sought after by investors.

> Recurring reservation revenues increased to 43% of revenue for the March quarter, up from 41% in the December quarter -- during a time of many restaurant closings, suggesting that OPEN’s client base is includes mostly established, healthy restaurants.

> In spite of the economic distress of the past year, OPEN has generated nice sequential growth in top line revenue for each of the past five quarters.

DigitalGlobe (DGI) better value than GEOY

2009-05-11T12:03:00.000-07:00

DGI summary ratio comparisons versus GEOY
. price to tangible book value: 2.2 versus -1.7 (very low, not good)
. gross profit margins of 90% versus 48% and
. operating margins of 35% versus 16%
> Maybe the company is not desperately in need of money given the above comparison with GEOY. GEOY is the one that needs the capital, not DGI.

read the updated DGI pre-IPO report, includes 'compare & contrast' with GeoEye (GEOY)
http://bit.ly/DzSTA

DigitalGlobe = hot IPO next week

2009-05-08T08:28:00.000-07:00

Hot IPO next week-- DigitalGlobe -- pre-IPO report http://bit.ly/DzSTA

BloombergTV interview -- Skype-hype from eBAY & the IPO Market

2009-04-17T10:25:00.000-07:00

BloombertTV Interview http://bit.ly/ybtru

based on this blog
Skype-hype from eBAY & the IPO Market
(1) EBAY’s Skype-hype, not seen since Google
Skype-hype message to Wall Street – eBay focuses on core business
. Top line revenue -- because of encroachment by Amazon & others.
. Balance sheet -- to convert a soft asset into hard dollars
eBay is pre-conditioning the IPO market, very much pre-IPO. Similar to what Google did. That ploy only works for large, heavily branded companies, who can get away with it, not smaller emerging companies.

WHAT DOES SKYPE-HYPE MEAN?
When a well-known force (eBay) starts to pre-condition the IPO market for a division spin-off -- in what is basically an IPO vacuum -- then that’s a sign of an expected much stronger IPO market.

(2) Three successful IPOs this month, and all are up
ROSETTA STONE
. Popped 40% yesterday, up again today
. Generates good cash flow, public market segment leader
. Understandable growth plan includes overseas expansion – 95% of sales now are in the US
. High branded consumer awareness

BRIDGEPOINT EDUCATION
. 30% haircut in IPO price, rose a little from reduced IPO price
. Lots of sector headwinds in the post-secondary online education market segment
. Questions about the market leader Apollo (APOL) accounting practices sunk the segment since Feb 1
. APOL itself touched almost $90 in early Feb then sank to almost $60 this month.
. The bloom is off the rose in the online post secondary education sector

CHANGYOU
One trick gaming pony from China
Underpriced IPO at 7 times earnings

(3) IPO SIMILARITIES – all three are
. Profitable
. Generate positive cash flow, which means they are not crippled by too much interest and/or overhanging debt re-financing problems
. Computer-related
. Have high gross margins: Changyou (93%), Rosetta Stone (87%), Bridgepoint Education (71%)

(4) IN GENERAL, WHAT DOES IT MEAN?
Investors are now very much aware of IPOs, especially because of Rosetta Stone’s success and because of eBay’s ‘Skype-hype”

Up until sometime in March many investors simply did not want to hear about IPOs. But if investors think they can look forward to getting in on a potentially ‘in demand’ (hot) IPO from Skype then they will also look at other IPOS in the meantime.

(5) IPO CRITERIA
Right now (and this applies to Skype, also) a successful IPO appears to need
. High gross margins
. Top line revenue increases going into the IPO, with a believable growth plan for top line revenue
. Profits
. Positive cash flow
. Very little overhanging debt

In other words, back to basic investing principles. Because ‘pie in the sky’ dreamy prognostications.have no credibility in this market.

(6) IPO PIPELINE
. Not too much in the pipeline right now
. However, there are many companies standing outside & looking into the IPO window. Those that have a good March quarter and meet the above criteria (#5 above) may be able to step through the window and actually IPO
. If their March quarter numbers good and if they push it, it is possible qualified companies can IPO by the end of the second quarter, June 30, 2009 or shortly thereafter.
. The summer IPO season ends the second week in August, so I expect to see some interesting IPO filings in the next month or so.

Disclosure: no positions

Rosetta Stone IPO +38%

2009-04-16T07:08:00.000-07:00

Rosetta St (RST) at $18 IPO price:
26x trailing 12 months P/E; 3x book; 4.2x TanBook

"They didn't mind leaving money on the table, because this IPO increases consumers' awareness of Rosetta Stone, which helps top-line revenue growth," Gaskins added. Reuters quote read

Disclosure: No positions

Rosetta Stone prices IPO at $18, for trading tomorrow, April 16

2009-04-15T17:21:00.000-07:00

$18 -- above range, a good sign. For trading Thursday, April 16

Rosetta Stone IPO report
includes 'compare & contrast': http://bit.ly/18evtp

Disclosure: no positions

Rosetta Stone IPO to be priced tonight. It's 'in demand'

2009-04-15T11:15:00.001-07:00

Bridgepoint IPO takes a 30% pricing haircut

2009-04-14T15:57:00.000-07:00

Original Bridgepoint IPO price range was $14-$16. Bridgepoint IPO actually priced at $10.50. That's a 30% haircut.

Reason: the post secondary online education sector was strong last year up until the first of February, when the largest company, industry sector leader Apollo (APOL) aka Univ of Phoenix almost reached $90 and recently almost touched $60.

IPOs can't fly against industry trend headwinds. Can't swim upstream when the current is washing that sector downstream. Also, almost 100% of the proceeds went back to stockholders, now that's the definition of an IPO bailout 'secondary'.

Rosetta Stone's IPO (RST) is better than Bridgepoint Education's IPO (BPI)

2009-04-14T14:13:00.000-07:00

IPO Analysis, Grading, Scoring from IPOdesktop.com
Rosetta Stone IPO: http://bit.ly/18evtp
Bridgepoint Ed IPO: http://bit.ly/4DhEsY
both scheduled for April 13wk

SIMILARITIES: RST & BPI
(1) Both are educational stocks
. Rosetta Stone provides language learning software
. Bridgepoint Ed provides post-secondary online education

(2) Both report revenues for 2008 in the $200mm range & both were profitable in 2008

(3) Both have good internal growth track records

(4) The trailing 12 mos P/E ratios are in the same range at price range mid-points: 23.4x for Rosetta; 29.7x for Bridgepoint

DIFFERENCES
(1) Rosetta is a market segment leader with a differentiated product

(2) 95% of Rosetta's sales are in the US, and growth plans are set for international expansion

(3) Rosetta's gross margin is higher, 87% versus 71% for Bridgepoint

(4) Price-to-book value is more favorable for Rosetta: 2.7 versus 20.8 for Bridgepoint

(5) Online comparables to Bridgepoint suggest it is fairly priced (trailing 12 months) relative to Capella Education (CPLA) at 28x and Strayer Education (STRA) at 29x. The range is wide, however, with Apollo (APOL) at 15x ($10bb market cap) and Grand Canyon (LOPE) at 93x ($677mm market cap).

Notice that post-secondary online ed stocks sold off 15-17% since March 31, so there are some headwinds in the sector.

Rosetta Stone IPO: http://bit.ly/18evtp
Bridgepoint Ed IPO: http://bit.ly/4DhEsY
Disclosure: No positions