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Wed September 26, 2012
Lesser-Known IPOs Fare Better Than Facebook
Originally published on Wed September 26, 2012 10:36 am
STEVE INSKEEP, HOST:
Facebook share price have lost almost half of its value since the social networking company had its initial public offering, or IPO, in the spring. Hundreds of millions of followers apparently will not guarantee you success in the stock market - at least not in the short-term.
Many lesser-known companies have also plunged into the stock market this year in the hopes of raising lots of capital, but their prices have not plunged - they're doing better than Facebook.
To find out which IPOs are working, which are not, and what they say about the economy, we called Linda Killian. She's portfolio manager for Renaissance Capital, which specializes in IPOs.
We saw an item in Wired, which pointed out that if you wanted to make money over the past several months, you would have been wiser to ignore the Facebook IPO and participate instead with Annie's, the food company. What's the difference there?
LINDA KILLIAN: Well, the difference is that Annie's has had the experience of improving its earnings. It is a - one of the very first breakthrough organic food makers. And they started off with their iconic mac-and-cheese. And it's just not in the organic part of the supermarket, it is actually sitting right next to its competitors, Kraft and other makers of boxed macaroni-and-cheese.
The second thing that's unique about Annie's is that unlike Facebook, which failed to meet its very high expectations, Annie's set relatively low expectations when it went public and it has greatly exceeded them.
INSKEEP: OK. So some of the difference between IPOs is tactics - who manages the IPO well. But some of the difference, it seems, has to do with strategy or with the fundamentals of the economy and how a company fits in to that economy. What are some other IPOs that have done particularly well this year, and what do they tell you about the economy?
KILLIAN: Well, one of the themes in the consumer part of the IPO market is value. I'll name one. It's a restaurant company called Chuy's.
INSKEEP: All right.
KILLIAN: They have Tex-Mex food. They started in Texas and they're not national. They're still pretty much a regional brand, but they have a very large restaurant and they give enormous plates of food. They serve huge martinis for about $10. Their average ticket, including liquor, is about $20.
Some of the other companies that have done very well are Five Below, which is a retailer that offers items that are no more than $5 each. And if you are in a big - one of the big malls and you've just been food shopping, Five Below might be right next door to it and you can entertain the children by letting them go through the store for 10 or 15 minutes and each spend two or three dollars and come away with several items that they feel very happy about.
INSKEEP: So we know that in the long term, looking back 10 or 15 years, the IPO market still doesn't look very good, but it's getting better than it was. What fundamentally is better about the economy than a year ago or two years ago?
KILLIAN: It's not so much what's better about the economy; it's that we're kind of staggering towards some type of economic recovery. The IPO market and new issuance have been bottled up for almost 10 years now and it's been difficult for companies to be able to come and raise public money. There is an enormous, enormous backlog of private companies that want to go public.
INSKEEP: Linda Killian, thanks very much.
KILLIAN: You're very welcome.
INSKEEP: OK, so you heard the Facebook story from 38 down to around 20 dollars a share. That Tex-Mex chain, Chuy's, has gone up from about $15 a share in its first day to over 20. And Five Below, which she mentioned, has seen its stock climb from 26 to just under 40 dollars a share. Transcript provided by NPR, Copyright National Public Radio.