Finding Bargains in the End of June IPO Pricing Collapse - Part 2

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This is the second part of a series reviewing the large number of IPOs pricing below the original midpoint, with a record five on June 26 alone.

The original article had a table reviewing all the stocks that IPO’d that week. The IPO Home table below narrows the list down to the six stocks that priced below the midpoint during the week of June 24:

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The stocks included Aratana Therapeutics, CDW, and HD Supply covered in the first part. This article will focus on NanoString Technologies (NASDAQ: NSTG), Silvercrest Asset Management (NASDAQ: SAMG), and Tremor Video (NYSE: TRMR).

Ironically, as this group priced significantly below the original range led by a 50% cut by Aratana Therapeutics, several stocks including Noodles & Company and Prosensa have had huge gains above the original midpoint.

In the next part, the review will focus on those four stocks that at least priced at the midpoint. Clearly, the two 100% gainers appear to offer little value now, but both Esperion Therapeutics and Luxoft Holding might be attractive. For now though, lets review the other three stocks that had weak IPO pricings.

Genomic diagnostics

NanoString Technologies priced 29% below the original midpoint of $14. The stock even collapsed to close the first day at nearly 20% below the offering price of $10. For investors that bought near the lows of the first trading day, the stock has provided a decent return, trading around $9 now.

The company booked $24 million in sales for the 12 months ending March 31, 2013. With a recent $130 million market cap and lack of Wall Street coverage, the stock could be a under the radar gem. NanoString recently announced a clinical study for Prosigna Breast Cancer Prognostic Gene Signature Assay, concluding that the PAM50-based assay provides more prognostic information in endocrine treated patients than the existing diagnostic tests.

Asset management

Silvercrest Asset Management priced at 15% below the original midpoint, but did close at $11.83 for an 8% gain on the first day. The stock now trades above the original range, providing a solid gain for investors obtaining the offering price of $11. The major reason for the IPO was the desire of a major outside investor to cash out.

The asset manager for wealthy individuals with assets in excess of $30 million intends to pay an attractive dividend of 4%. The company booked $53 million in revenue for the 12 months ended March 31, 2013. The company now trades at a market cap of around $145 million and offers an interesting valuation if it can continue growing assets under management that have recently surged to $13.6 billion. The resurgence of the stock market bodes well for this asset manager.

Video ads

Tremor Video appears to be in the right sector at the wrong time. The video ad network stock priced at 17% below the midpoint and plunged another 15% in the first trading day. The stock plunged even further to a low of $6.81, making for the worst performing IPO of the week. Tremor might provide the best of opportunities now as the market focused more on the IPO failures of other advertising tech firms such as Millennial Media and Marin Software.

The leader in the in-stream video ad market saw revenue surge 47% during Q1 2013 to $25 million. In fact, the in-stream business grew revenue 52.9% to $24 million. With a current market cap below $400 million, the stock offers a compelling valuation as revenue surges over 50% from a base of around $100 million. As investors become more confident in advertising stocks, the sector as a whole and Tremor Video in specific should see an expansion of multiples.

Bottom line

This group of IPOs provides some opportunity for investors willing to do the research. The small size of the deals leaves smaller investors with an advantage as the big institutions overlook the stock do to a lack of size. Considering the growth potential of Tremor Video, it might offer the most potential of all these stocks already reviewed.

As mentioned in the first part, investors will be wise to review the first quarterly reports as public companies to follow the progress. If the growth at Tremor Video continues, the stock won’t last this low much longer.

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Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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