Although 2011 was a tough year for the markets, and one in which the major indexes made little progress, investors were still willing to tip into the initial public offering (IPO) pool. Well-known companies like LinkedIn (NYSE:LNKD), Pandora (NYSE:P) and Groupon (Nasdaq:GRPN) made their debuts as publicly-traded companies, while HCA Holdings (NYSE:HCA) returned to the market. (For more, read How An IPO Is Valued.)
TUTORIAL: IPO Basics
As we now turn to the end of year and look ahead, there are a number of companies intending to go public at some point in the next year. While a bad start to the new year in the markets could lead some (and potentially all) of these names to postpone their offerings, these IPOs are most likely "when, not if" events. Before leaping into the IPO pool, though, investors should remember that playing IPOs can be tricky; not only is it difficult to get access to the low-priced IPO shares, but many of these stocks fall from their initial first-day closing prices.
There is arguably no other company on this list that gets as much attention as Facebook. A leading company in social media (and the leading company by some metrics), Facebook has the relatively rare distinction of appealing to huge swaths of society. Just as important, the company has built a savvy business model wherein most of its users do not realize that they are, in fact, the product that the company sells.
Facebook could well be a $10 billion IPO, valuing the company at about $100 billion or just a bit more than half the current market capitalization of Google (Nasdaq:GOOG).
Univision was once a publicly-traded company and if anything, the company has gotten even stronger in the interim. Not only is Univision the largest Spanish-language TV channel in the United States, it often beats major networks like Disney's (NYSE:DIS) ABC and News Corp's (Nasdaq:NWSA) Fox, in prime time ratings. (For related reading, see The Winner And Losers Of Recent IPOs.)
Gilt Groupe definitely has the DNA to be a successful online retailer, with its founders coming from Doubleclick, eBay and Louis Vuitton. In its short life, Gilt Groupe has already shown a capacity to adapt and alter its model. What was first an invitation-only site is now open to all comers, and the company is experimenting with sales that lasts longer than its original one- to two-day flash sale model. People still love bargains and still love luxuries, so a company that makes it convenient to buy luxury brands for as much as 70% off retail, certainly has a fighting chance.
Local is the next battleground in search and social media, and Yelp is an early leader. Google, Yahoo (Nasdaq:YHOO) and Microsoft (Nasdaq:MSFT) have all targeted local searches as an important growth market. However, Yelp's large user base and the stickiness of services like online peer reviews are a valuable competitive factor.
The world of private equity is becoming increasingly public and investors may soon be able to buy shares in one of the best-known names in the space – Carlyle Group. Based on recent data, Carlyle Group is the third-largest private equity manager by assets under management, and will be the largest such company to be publicly-listed (though Goldman Sachs (NYSE:GS) is a public company and owns the second-largest private equity business).
Carlyle is famous not only for its investments in markets like aerospace/defense, healthcare and energy, but also its real estate holdings and portfolio holdings like Dex Media, Dunkin' Brands (Nasdaq:DNKN) and PPD. Carlyle is also famous for employing a who's who of the political world as advisors including former President George H.W. Bush, former British Prime Minister John Major and former Thai Prime Minister Thaksin Shinawatra. (For more on Hedge Funds, read Taking A Look Behind Hedge Funds.)
Formerly the finance division of General Motors (NYSE:GM) and known then as GMAC, Ally Financial is now 74% owned by the U.S. government. Like so many financial companies a decade ago, Ally stretched beyond its initial mandates and got involved in residential mortgages. Ultimately, GMAC/Ally's losses became more than the company could withstand, it could no longer support its efforts in providing automobile financing, and the company had to depend upon multiple federal bailouts to a total exceeding $16 billion.
The new Ally Financial is still involved in most of its prior lines of business, including auto financing, insurance, mortgage products and online banking.
The Bottom Line
Investors should remember to approach any and all IPOs like any other type of equity investment. Due diligence is vital, and the S-1 filings with the SEC can be invaluable sources of information. Investors should also realize, though, that IPOs typically underperform once the initial frenzy and enthusiasm is over, so readers would be well-advised to approach these names with caution if and when they reach the public market. (For some disappointing past IPOs, check out The Biggest IPO Flops.)