Chinese companies involved in the water and gaming industries topped the list of the best-performing initial public offerings (IPO) in 2009, offering investors who bought at the deal price gains of more than 100%.
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IPO Activity Up
IPO activity in 2009 raised $23.6 billion in 58 deals, up from the 43 deals in 2008, according to Renaissance Capital. Although this might not seem all that substantial, most of the 2008 deals were in the early part of the year, and the IPO market effectively shut down midyear. There was only one IPO after August 2008, as Grand Canyon Education (Nasdaq:LOPE) decided to go public in November, 2008.
Mead Johnson Nutrition Company (NYSE:MJN) broke the IPO logjam, and came out of Bristol-Myers Squibb (NYSE:BMY) back in February, 2009. The stock is up 77% since then. This was a brave move at the time, since the equity markets were plunging lower every day, and it was the first IPO deal of the year. The strength of the deal may be due to the basic nature of its business, as it sells infant formula and other nutritional products. (For more, see IPO Basics Tutorial.)
Duoyuan Global Water Inc. (NYSE:DGW) was the clear leader in the IPO market in 2009, returning 135%. (All returns are from pricing date through December 11, 2009) Duoyuan Global Water is not in a glamorous industry, as it makes water and pollution control equipment. However, the there are a lot of people in China, all of whom drink and use water, and this helped the company report double-digit growth in revenues and earnings in the third quarter of 2009.
Bridgepoint Education (NYSE:BPI) provides post-secondary education services, both online and at several campuses in the U.S. The company is up 55%, as it saw demand increase for higher education and retraining due to the high level of unemployment. The company beat its guidance on third-quarter earnings and saw 80% growth in enrollment, as well.
Changyou.com Limited (Nasdaq:CYOU) came to market in April, 2009 at $16 per share, and the company is up 92% from that level. Changyou.com Limited is also headquartered in China and develops massively multi-player online role-playing games. Although the company was a little short on revenue guidance for 2010, online gaming is still a huge growth market and should stay strong in 2010. (For more, see How Does An IPO Get Valued?.)
SolarWinds, Inc. (NYSE:SWI) may sound like an alternative energy company, but its business has nothing to do with that. The company makes application software and has returned 67% since its IPO in May 2009.
The Bottom Line
The IPO market rebounded in 2009 from a moribund 2008, but just barely as this was a low barrier to clear. The investment bankers did it the old fashioned way by bringing companies to market that were profitable and in fairly stable industries. (For more, see The Murky Waters Of The IPO Market.)
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