A wave of exciting
IPOs have hit the market in 2011 and even though the idea behind the stocks may sound promising, not all newly-traded stocks are performing up to their expectations. Of the group of IPOs, there are four that stand out as
indicators of what investors are willing to buy and what they find interesting, but will not put their money where their mouth is. Below are the haves and have nots so far for 2011. (To learn more on the world of IPOs, read
The Murky Waters Of The IPO Market.)
TUTORIAL: Stock-Picking Strategies
The Winners
Nielsen Holdings (NYSE:
NLSN) began trading in late January on the NYSE and closed its first day at $24.30. By the end of May the stock had risen by nearly $10 per share as it continued to attract new money. The information and measurement firm supplies its customers with critical media and market data that help in gauging the success or failure of products and services. One of the most recognized products is the Nielsen ratings for television shows. The company trades with a forward
P/E ratio of 16.7 and a
price-to-sales of 2.1. Support on the chart is in the $29 to $30 range.
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ServiceSource International (Nasdaq:
SREV) closed out its first trading day (March 25, 2011) at $12.18, near the low of the session. However, two months later the stock began to rally and traded above $20 in late May. The stock has now begun to
consolidate near the $18 area, where it could once again attract buyers. The company provides revenue management solutions that drive renewals of subscription agreements for technology companies. They also have a suite of cloud applications. The company trades with an unusually high forward P/E ratio of 156 and a price-to-sales of 7.5. I believe both are too pricey at this time. (For more examples of good and bad IPOs, check out
Good IPO, Bad IPO)
The Losers
Renren (NYSE:
RENN) opened its first trading day (April 4, 2011) at $19.50 and got as high as $24.00 before closing at $18.01. By June 10, the stock was below $10 and sitting at a new low. The China-based
social networking company operates the website
renren.com, similar to Facebook in the U.S. The IPO generated a high amount of buzz; however, the money-losing firm was unable to keep the attention of investors as they ran for the exits. With a price-to-sales of 47.8 it is tough to put a true value on the company that is still losing money.
LinkedIn (NYSE:
LNKD) was the first social networking company to IPO in the U.S. and similar to RENN it rallied its first day before closing well off its intraday highs. On May 19, 2011, LNKD opened at $83.00 and traded as high as $122.70 before closing at $94.25 per share. By June 10, 2011, the stock hit a new intraday low of $70.50, a 43% drop from its intraday high set on its first trading day. The fundamentals are not at all attractive with a forward P/E ratio of 115.6 and a price-to-sales of 23.5. It will be interesting to see if the interest continues to wane as more social networking IPOs hit the market in the coming months. (For more unsuccessful IPOs, read
The Biggest IPO Flop.s)
The Bottom Line
An IPO may have a great story like LNKD or RENN, but it does not always equal a solid investment. An investor doing their due diligence can discover that the fundamentals are too over valued and that buying the first day of trading could be very costly. Be patient when it comes to IPOs and do your research. (To learn more more about IPOs, check out
The Ups And Downs Of Initial Public Offerings.)
