Unbelievable, Overnight IPO Riches? Are the Glory Days Back?

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Mike Larson, Money and Markets columnist and editor of the Safe Money Report, is out today. Mark Najarian, the managing editor of Money and Markets, is filling in …

The spectacular launch of the initial public offering of GoPro, the maker of miniature cameras used by adventurists, has put the focus squarely on the once-moribund IPO market. Is it time again to gear up for massive, unbelievable overnight riches? Maybe, but stay calm.

The IPO market, virtually closed down for the past couple of years, is heating up again. These days, we have so many companies in various stages of offerings — from filing initial paperwork to setting price ranges to finally going public and selling shares to the public — that it’s difficult to keep track of all the names.

And, of course, the granddaddy of all — the highly anticipated Alibaba IPO — is looming for later this summer, perhaps in August.

The IPO market is not as insane as it was in the irrationally exuberant days of the dot.com bubble era, so it’s necessary to keep your wits when investing. Still, it’s hard to deny that there are some exciting opportunities out there — and some will certainly pay off in a big way for lucky investors, as GoPro did on its first day of trading.

To get a more complete picture of the IPO market, we checked in on several trackers of offerings, including Nasdaq, Renaissance Capital, and the website iposcoop.com — all of which do a good job of tracking upcoming deals.

Renaissance Capital says that, worldwide, 195 IPOs have priced so far this year, an 81 percent increase from the same time a year ago. Below is a Renaissance chart on U.S. IPOs through Wednesday, showing 139 pricings so far this year, a 64 percent increase from the same time a year ago.

Click for larger version

As for GoPro, trading under the symbol GPRO, it sold its shares to the public today, with an initial price of $24 a share, the high end of the proposed range of $21-$24. The California-based shares quickly surged and were above $31 late in trading. It’s too early to see how GoPro will do in the long run and whether those gains will hold up. Analysts say that the IPO is just the first step, and that the company must continue to innovate and grow revenue as the initial excitement dies down.

GoPro wasn’t the only company to go public today. ServiceMaster Global Holdings (SERV), which provides pest control services and warranties on household appliances, went out at $17 a share and was trading at $17.95 late in the session.

And others have gone off recently. Of the big gainers:

* Zendesk leads the way, according to Renaissance data, pricing at $9 a share on May 14 and trading around $17.97 this week, a rise of nearly 98 percent. The company provides Cloud-based helpdesk software. It rose 40 percent on its first day, giving it a market cap of about $1.2 billion, according to Forbes.

* Kite Pharma priced at $17 a share on June 18 and opened up 50 percent. It’s now around $29.28, up 89 percent from the offering price. It develops therapies and treatments for cancer.

* And: Alder BioPharmaceuticals has a rise of 83 percent; Agile Therapeutics 78 percent; Tuniu 72 percent.

But not all IPOs (and not all pharma offerings) necessarily head straight up. Parnell Pharmaceutical priced June 18 at $10 a share and is down 21 percent to $7.90. Still, most of the IPOs listed on the Renaissance IPO Center are showing gains over the past few months.

On the list of the largest upcoming IPOs, according to iposcoop.com, are Transocean Partners, with expected volume of $350 million (no date set); VTTI Energy Partners LP, $420 million; and Shell Midstream Partners LP, $750 million.

Occasionally, the name of the company and the hype following it often plays the key role when it comes to IPO success. A name familiar to many readers is El Pollo Loco Holdings, the fast-food chain. Its IPO will likely have a volume of $100 million, iposcoop.com and Forbes estimate.

Camera maker GoPro started trading on the Nasdaq today.

Given how well medical-related IPOs have done, it might be a good idea to keep a close watch on that sector. Minerva Neurosciences, KineMed, Adeptus Health, Ambrx, Amphastar Pharmaceuticals, GlobeImmune, Microlin Bio and Syndax Pharmaceuticals are all names with scheduled IPO action this week. Amphastar launched at $7 and quickly gained about 8 percent when it went public.

“The granddaddy of all — the highly anticipated Alibaba IPO — is looming for later this summer, perhaps in August.”

As for Alibaba, analysts are still trying to determine how much the Chinese online retailer will raise with its offering. According to the Wall Street Journal, Morningstar estimated Alibaba’s equity value at $220 billion and predicted that the IPO will raise $26 billion.

That would make it the largest initial public offering in history, beating out the Agricultural Bank of China’s $22.1 billion deal in Shanghai and Hong Kong in 2010, according to Dealogic figures reported by the Wall Street Journal. It listed the top U.S. IPOs as Visa ($19.7 billion in 2008) and the top U.S. tech IPO as Facebook ($16 billion in 2012).

What about you? How have you fared with IPOs? Did you get in on GoPro? Are you really fired up about an upcoming offering? Click here to exchange your ideas.

P.S. Although they aren’t IPO shares, there are a lot of potential buys in the low-priced stock segment of the market. Check here to learn more about the Top Stocks Under $10 service.

OUR READERS SPEAK

Mike Larson’s column on the Iraq crisis, which looks to be spreading to neighboring countries and holds the potential to become a major regional conflict, ignited a war of words on the blog.

Reader Everett sees it as the end of Iraq as we know it: “I think that Iraq will formally be divided. The Sunni nations (Saudi Arabia, et. al.) may not like ISIS, but they have absolutely no interest in having another large Shia nation allied with Iran having so much territory. The Sunnis will have no better opportunity to limit the power of the Shias. I cannot see how Iraq will be allowed to go back to be the same nation it once was. It will be interesting to see how the Kurds come out of this.”

Reader John K. doesn’t see an end in sight to the long-standing disputes: “Unfortunately, current turmoil in the Middle East is likely to continue for years, maybe decades. There are hundreds of years of religious and political issues that are boiling up again. Natural gas, and oil producers and services need to be a part of everyone’s portfolio.”

OTHER DEVELOPMENTS OF THE DAY

 Alcoa Inc. (AA, Weiss Ratings: C) shares surged after it increased its presence in the aerospace sector by agreeing to acquire British jet engine component company Firth Rixson. Alcoa will pay $2.35 billion in cash and $500 million in stock to private equity owner Oak Hill Capital. The U.S. company is increasing its focus on finished aluminum products for aerospace, autos and other industries, another step in its turnaround effort away from being a pure aluminum company exposed to unpredictable movements in commodity prices.

 U.K. bank Barclays PLC (BCS, Weiss Ratings: D+) has become the latest financial company to run afoul of U.S. authorities. The New York Attorney General sued Barclays for allegedly lying about how it favors high-frequency traders in the firm’s stock-trading business. The civil suit alleges that the British Bank engaged in fraudulent activity related to a so-called “dark pool,” in which buy and sell orders aren’t reported to the public, allowing investors to hide their trading interest and evade faster-moving firms, the Wall Street Journal reported.

Don’t forget, you can let us know what you think by putting your comments here.

Best wishes,

Mark Najarian

Mike Larson’s afternoon Money and Markets commentary will resume on Monday.