Stealth IPOs: Is an Avalanche About to Hit?

Source: Dwight Burdette | Wikipedia

As hot as the restaurant chain Noodles was as an IPO, it caught a lot of investors off guard.

The reason: It fits in a category you could call stealth IPOs, which are for "emerging" companies that have revenues of less than $1 billion and are going public on a fast track created last year by the Jumpstart our Business Startups (JOBS) Act. One of the hallmarks of these deals: Less disclosure.

So far this year, according to, of 94 IPOS, 48 were JOBS Act deals. And based on's rough calculation, another 40-plus could debut between now and sometime in August.

Among those that have already debuted, besides Noodles, are several hot deals, including Xoom, Model-N and Tableau Software.

The list on tap includes Diamond Resorts International, which operates high-end timeshares; WCI Communities,a one-time battleground stock before it filed for bankruptcy in 2008; RetailMeNot, the largest digital coupon marketplace, and Rexford Industrial, a REIT of California industrial properties.

Determining the exact number that will actually IPO isn't easy.

"It's like a shadow inventory," says Cindi Profaca, managing director of, who has been analyzing IPOs for 18 years. "You don't know what the real inventory is."

That's because unlike traditional IPOs, which file an initial S-1 prospectus with the SEC as their initial foray into the IPO process, these start out under the radar. They can test the waters and gauge interest with a private SEC filing accessible only by qualified investors.

There is where it gets interesting -- and still somewhat below the radar: Once they file their S-1, usually after filing a "draft registration statement"—which eagle-eyed investors can spot much earlier as a Form DRS on on the SEC's Edgar website— they can be public in a mere 21 days without doing the classic road show presentation to prospective investors.

Noodles, for example, was public in less than five weeks after filing its S-1. Compare that with months, sometimes many months, for a traditional IPO.

The shorter the lead time, the less time for scrutiny—and the less time for deals to get chatted up (or down!)

My take: Beware.

—By CNBC's Herb Greenberg. Follow him on Twitter:@herbgreenberg and Google+

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