Trader Talk

After brief lull, IPO market heats up again

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The hit-or-miss market for initial public offerings is heating up again. After a brief lull during Memorial Day, a few new names are testing the waters. Last night, wearable camera maker GoPro announced they will list on the NASDAQ under the symbol (GPRO), looking to raise 17.8 million shares, with pricing expected between a range of $21—$24.

But today we have four new issues that will begin trading across several sectors. In particular, two are attracting attention because they are in very hot sectors: energy and China. On the NYSE, Zhaopin Limited (ZPIN), which runs China's second biggest online job board for white-collar workers, priced 5.6 million shares at $13.50, in the middle of the $12.50 to $14.50 range.

Hard to believe, but Chinese IPOs have outperformed U.S. IPOs this year by a wide margin. On average, the last year's Chinese pricings are up 63 percent from the IPO price (almost half on the first day, the other half post-first day). The average U.S. IPO is up 25 percent in that same period.

'Very robust IPO calendar' ahead: Nasdaq

Why? Despite the worries about slower growth in China, everyone wants to get on board with the explosive growth in internet services in Asia's dragon economy.

Warning: the worry is that the Alibaba IPO may take the air out of the Chinese IPO. Markets are still expecting an IPO in August, but much depends on how many questions the SEC has for the company.

The other hot sector is Energy. On the NYSE today, oil rig supplier Nordic American Offshore priced 5.8 million shares at $16, at the low end of the $16—$18 range. This is an oil service company that transports supplies and equipment to and from offshore installations such as drilling rigs. The company already trades over-the-counter (OTC) in Norway. They have a big dividend yield of about 11 percent.

While biotech and cloud computing gets a lot of attention, the energy sector has been the best performer in the IPO market this year. By the numbers, here's the 2014 IPO action by sector:

Energy: up 27 percent

Tech: up 21 percent

Consumer: up 19.7 percent

Healthcare up 14.9 percent

(Source: Renassaince Capital)

Why energy? There's lots of growth in shale, from the production to growing pipeline capacity. Marcellus, Bakken, Permian Basin, Eagle Ford have all become household names in the shale boom. There's much more efficient drilling to get at that natural gas and oil.


1) on the NYSE, Trinseo (TSE) priced 10 million shares at $19, at the high end of the $17 to $19 price talk. They came out of Dow Chemical. Synthetic polymers: think rubber for tires (Bridgestone is a customer), which they are selling because they are lighter and improve fuel efficiency. This is a leveraged buyout (LBO) from Bain. They previously filed for an IPO in 2011, but withdrew two years later: they have a lot of debt, and they are not paying a dividend.

2) On the NASDAQ, mobile device manager MobileIron (MOBL) priced 11.1 million shares at $9, in the middle of the $8 to $10 price talk. This is a bring-your-own-device (BYOD) company. They enable employees to use whatever device they have to connect to their company's network securely.

Another big energy deal tomorrow: Memorial Resource Development (MRD) is backed by Natural Gas Partners, another oil and gas driller in northern Louisiana.

As for GoPro, this will be a healthy IPO: roughly $400 million IPO at the midpoint, the proposed valuation about $3.4 billion. They don't just want to sell cameras: they want to become a video company as well. Like Apple, it's not just about the phone, it's about iTunes (music). They want to build a media outlet on high-energy sports, and they have the cash to do it: the company has $1 billion in revenues, and they are profitable.

Foxconn makes the GoPro and they are an investor!