The Best and Worst IPOs of August
Sep 1st 2012 2:24PM
Updated Sep 1st 2012 2:30PM
Typical for late summer, August was a slow month for initial public offerings. Excluding closed-end funds and trusts, there were only seven filings that went on to be listed on the major American exchanges.
While none of them matched the hype surrounding Facebook's (NAS: FB) disastrous listing, many of the companies should nevertheless be on your radar. Let's take a look.
Performance Since Listing
|Globus Medical (NYS: GMED)||Aug. 3||16%|
|Eloqua Limited (NAS: ELOQ)||Aug. 2||9.2%|
|Peregrine Semiconductor||Aug. 8||7.9%|
|Bloomin' Brands (NAS: BLMN)||Aug. 8||4.1%|
|Performant Financial||Aug. 10||3.4%|
|Hi-Crush Partners||Aug. 16||(3.1%)|
|Manchester United (NYS: MANU)||Aug. 10||(4.3%)|
Source: Nasdaq and Yahoo! Finance. Performance as of Aug. 30.
The "ugliest IPO of the year"
The inglorious prize for worst-performing IPO goes to Manchester United, the fabled U.K. professional soccer team. As Motley Fool managing editor Brian Richards noted at the time of Manchester's listing, there are two likely explanations for this.
First, Man U is saddled with massive amounts of debt related to its 2005 leveraged buyout by Malcolm Glazer, an American billionaire who also owns the NFL's Tampa Bay Buccaneers. Indeed, according to the company's own F-1 filing, "Our indebtedness could adversely affect our financial health and competitive position."
And second, the club's ownership structure gives shareholders essentially no say in the deal. While the Glazer family got shares with 10 votes apiece, public investors receive only one vote per share. It was for this reason that Brian issued this prescient warning: "Public shareholders, if you think you'll have any say in the decisions of the enterprise, disabuse yourself of that thought right now."
The yin to Manchester's yang
Meanwhile, on the other side of the performance spectrum was Globus Medical, a self-described leading spinal-implant manufacturer based in Audubon, Pa. Since going public, shares in the company are up a staggering 16%, handily beating out the runner-up, Eloqua Limited, a maker of "on-demand revenue performance management software solutions for businesses."
The reasons for Globus' success were evident in its most recent quarterly earnings. For the quarter ended June 30, the company reported an 18.6% year-over-year sales increase, going from $81 million in 2011 to $96 million in the second quarter of this year. And unlike Manchester United, it's done so with virtually no debt to speak of. Take one look at its balance sheet, and you'll see what I mean. While the company sports $367 million in assets, it has liabilities of only $46 million; the remainder is all equity.
In terms of the bottom line, moreover, its net income also improved by double digits, going from $15.9 million to $19 million, a 19% increase. And despite its impressive growth, Globus trades for an arguably reasonable 22 times earnings. Talk about the yin to Manchester's yang.
Another notable mention
Although it was neither the best nor the worst, another notable August IPO was that of Bloomin' Brands, the parent company of Outback Steakhouse and Carrabba's Italian Grill. However, fellow fool Sean Williams postulated that it may be the "worst bloomin' IPO of 2012" -- which would be an impressive accomplishment given Manchester United's presence.
The problems were obvious right from the start. While Bloomin' had originally hoped to sell 21.4 million shares in the $13-$15 range, it was forced to settle with an $11 offering of just 16 million shares, raising half the amount of what it set out to. The reasons were similar to those that have weighed on Manchester. Quite simply, it's laden with copious amounts of debt -- $2.1 billion, to be precise -- and a negative tangible book value. By buying its shares, in other words, investors were effectively assuming a liability and not an asset.
Foolish bottom line
While IPOs are an essential part of the public marketplace, we at The Motley Fool nevertheless urge investors to exercise restraint before participating in the hype. That's a big part of the argument about Facebook right now. Learn more about where the social-media giant will go from here in the Fool's premium report on Facebook. It has the inside scoop on prospects for monetization and profits, with much more. Get your report today.
The article The Best and Worst IPOs of August originally appeared on Fool.com.Fool contributor John Maxfield owns no shares of any of the companies mentioned above. The Motley Fool owns shares of Facebook. Motley Fool newsletter services have recommended buying shares of Facebook. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
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