Tuesday, February 27, 2024
Hometrader talkIPOs flood maket, swimming against tide of 'bubble' speculation

IPOs flood maket, swimming against tide of ‘bubble’ speculation

The initial public offering (IPO) rush is gathering steam.

While Candy Crush game maker King Digital (KING) is getting all the press, there are several others of great interest. In all, the market will absorb 11 different IPOs this week.

KING is seeking to raise 22.2 million shares in a range of $21—$24. Even at $24, that totals $532 million, a very small part of the estimated $7.2 billion market capitalization, and about 7 percent of the company.

The largest by offering is CBS Outdoor Americas (CBSO), which is exactly what it says it is: CBS' billboard business. However, it's like most of these companies: they are only selling a small part of the business. CBSO will offer 20 million shares at a midpoint of $27, which roughly translate to $540 million— just a small part of its estimated $3.2 billion in market cap. This will be structured as a Real Estate Investment Trust.

Software as a service is red-hot, so there will be a lot of people looking at the TriNet Group (TNET) IPO. They allow clients to outsource human resources functions: payroll processing, employee benefits and retirement plans. The company is looking to sell 15 million shares at $15-$17 apiece. This is an established company, been around since 1988, with $1.6 billion in revenues.

Also of interest: Nord Anglia Education, a Hong-Kong based company that operates premium schools around the world. They have 17,000 students at 27 schools in China, Europe, Middle East, and North America. They're looking to price 19 million shares in a range of $15-$17.

King and Nord Anglia should price Tuesday night for trading Wednesday, TriNet should price Wednesday night for trading Thursday, and CBS Thursday night for trading Friday.

So are IPOs in a bubble? I've said it before: you get IPOs out when market conditions are most ideal. The stock market is holding up, and that is the single most important factor for IPOs. If the stock market is lousy, the IPO market will be lousy.

Secondly, the right sectors are coming out. This includes biotech/pharma now, often with substantial backing from major companies. Large companies have a diminished pipeline of drugs they are desperate to replace.

Biotech/pharma may be playing out now, but that is being replaced by technology.


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