$KING Doesn’t Kill $IPO Enthusiasm
The Candy Crush Saga hasn’t completely soured investors on IPOs. Renaissance IPO ETF, $IPO, was among the most discussed tickers on investing social network StockTwits.com Monday morning, despite last week’s disappointing initial public offering of gaming company King, $KING. Some investors are particularly looking forward to the upcoming IPOs of a Mediterranean restaurant chain and a biotech firm with a promising cancer drug delivery system.
The enthusiasm for IPOs is somewhat surprising given the recent $KING performance. The company fell 15.6% on its first day of public trading. That was the worst first day loss in 15 years, according to Renaissance Capital.
Investors on StockTwits.com said King, which makes the blockbuster Candy Crush game, didn’t warrant the $7 billion valuation implied by its $22.50-per-share IPO price. However, some investors also said the sharp sell-off was overdone. The stock traded at $18.43 by mid-day Monday after rising 2% intra day.
$KING One game makes a TON of money…. is this negative or positive? Maybe we can draw more positives from it? Everyone so bearish here
— Jesse Beahm (@Beahmer) Mar. 31 at 01:23 AM
On Monday, investors looked forward to coming IPOs with less lofty valuations. Mediterranean restaurant chain Zoe’s Kitchen set the terms for its initial public offering Monday that would value the company at around $221 million. The company plans to trade on the NYSE under $ZOES. THE IPO price will be between $11 and $13.
Zoe’s is not profitable, but revenues are growing. The company posted a net loss of $3.7 million in 2013 as it has opened more restaurants. Zoe’s now operates 111 restaurants, up from 21 locations and five franchises seven years ago. It made $116.4 million in sales last year and is growing at a compound, annual rate of 38.1%, according to an SEC filing. That growth rate includes new stores. Comparable store sales grew at a more modest 6.9%.
Still investors are excited.
— Eddie DaRoza (@eddiedaroza) Mar. 31 at 10:40 AM
Cashtaggers also discussed Cerulean Pharma, a late stage biotech company developing therapies for liver and ovarian cancer that exploit the large pores in tumors to deliver cancer drugs directly to malignant growths. Cerulean plans to list under the ticker $CERU and to raise about $60 million with an IPO price of between $11 and $13 per share. Cerulean’s implied valuation at that price is $180 million.
And investors continued to speculate about Alibaba’s upcoming IPO price. The Chinese e-commerce and Web portal said earlier this year that it would debut on the U.S. stock exchange, perhaps as early as April. Investors anticipate the company’s IPO price to value it at around $140 billion.
— Patrick Walther (@patrick_walther) Mar. 31 at 01:20 PM
Yahoo, $YHOO, would be a major beneficiary of the Alibaba IPO. The struggling Web conglomerate has a 24% stake in the company. Nearly its entire $36 billion market cap is based on the projected worth of its Alibaba stake and current $5 billion in cash and equivalents. Yahoo plans to sell as much as 40% of its stake.
— David Putnam (@david_putnam) Mar. 19 at 04:25 PM
Despite the excitement over Alibaba and other coming IPOs, the feeling among many investors is that the momentum that had fueled the earlier offerings of, say, Coupons.com, $COUP, which jumped 88% in its first day of trading, is now gone. Investors are too concerned about the macro-economic picture to bet on exponential-growth.
StockTwits’ founder Howard Lindzon believes the 5% fall in $IPO during the past month shows how bearish investors have become on momentum stocks.
— Howard Lindzon (@howardlindzon) Mar. 26 at 09:12 PM
It remains to be seen whether Zoe, Cerulean or Alibaba’s IPO will fully reinvigorate the momentum crowd. But, if the $IPO chatter is any sign, demand hasn’t died.
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