DELPHI AUTOMOTIVE IPO Brings Mixed feelings

delphi automotive ipo DELPHI AUTOMOTIVE IPOThe Delphi Automotive IPO could bring up some mixed feelings for some investors. Back in 1999 the company’s IPO did very well, trading up almost 10% on the first day after being spun off by General Motors (GM:NYSE). At that time, some investors were looking for nuts and bolts stocks to rotate into because of rising internet sector valuations.

However, the Delphi Automotive IPO buyers who held the shares for the long haul were disappointed. The company started laying off employees in 2001, and changed it’s name from Delphi Automotive Systems to Delphi Corporation shortly after. Scrutiny from the SEC came in 2004 in regards to accounting practices, and certain transactions. Then in 2005 Delphi filed for bankruptcy.


Now why are we seeing renewed interest now in the upcoming revamped Delphi Automotive IPO? Is it just a recycled deal ? Or have conditions changed for the better?
Well the jury is still out, and as most know the IPO market is iffy at best. Many of the recent deals that have traded, seem to be at the mercy of the premarket S&P futures to decide their opening pops or declines.

Many of the old school Delphi investors know that the company was bleeding money earlier in the decade, however conditions have changed. So far in the last two years, the company has been extremely profitable, and margins have been healthy as well.

At this point the Delphi Automotive IPO is slated to trade in Mid-November, and they are intending to issue 24.1 million shares in a range between $22 and $24.

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Initial Public Offerings INITIAL PUBLIC OFFERINGS Initial Public Offerings seem to be a moot point right now, but that can change quickly. Especially if the market all of of a sudden capitulates. Ask yourself this question. Why are companies like Groupon and Yelp still looking to go public in the near future despite these market conditions ? Maybe they think we are near a bottom.
 Well it’s pretty simple, Initial public offerings are a fickle beast. The only constant, is how to buy them if you are a long term holder. Plus, it’s common knowledge that some of these enormous Initial Public Offerings valuations have been reset to the downside in this current market. So maybe some potential bargains will be coming to market in the near future. Here are some tips below on the subject:
LOOK AT THE PROSPECTUS- A lot of quality behind the scenes info is available in this type of legal document. Insider selling and compensation are always topics that can create negative interest. However, a prospectus is a great source for a general vibe on the company’s future prospects.
COMPARE TO INDUSTRY- Like most initial public offerings, stocks have peers. This type of due diligence only requires simple math that involves comparing revenues, earnings and market caps to see if the Initial Public Offerings in question is expensive or inexpensive relative to the group. For instance, if you buy an Initial Public Offerings that all of a sudden becomes worth 3x the market leader in the first two days of trading, it might be wise to take a profit.




DO YOU FLIP ?- The flipping of an initial public offerings is usually a sensitive topic. Most brokerage firms discourage it, but the strategy of selling quickly for a profit is often the safest way to play the spec names. However, massive gains can potentially be achieved if an investor does his homework and truly buys into the quality of the business. Do you think flippers of Google wish they still owned their positions instead of taking a small gain. Holding IPO‘s for the long term isn’t for everyone, but it’s something to consider on an individual basis.
DON’T WASTE TIME- This is something that many chasers of initial public offerings don’t seem to grasp. Let’s say Jane Doe has $100k at ABC Brokerage and a super hot deal is about to come to market. Now what I mean by super hot is 20x to 40x oversubscribed. Which basically means there are far more buyers than stock available. In this scenario, odds are that Jane isn’t going to receive an IPO allocation because institutions and super high net worth clients are going to take the overwhelming majority of the firms’ economics. Mainly because these super clients generate a large amount of commissions and if a bone is going to be thrown, it will be thrown to them. So in this case, if you are a regular investor and like the company, don’t make 25 phone calls trying to get offering shares. Save your energy and focus on your aftermarket strategy.
Check back for more color and insight on initial public offerings.

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YELP IPO Causes Stir

YELP IPO YELP IPOIt’s no secret that the recent IPO market has been dead and this is why the positive sentiment on the upcoming Yelp IPO is causing somewhat of a stir. Especially after high profile deals like Facebook and Zynga were pushed back on the calendar.

It was once reported that Yelp once refused a takeover offer from Google (GOOG:NASDAQ) in the $500 million range. However, the recent Zagat acquisition by Google for $125 million might be creating some urgency for Yelp IPO CEO Jeremy Stoppelman. Especially since Zagat reportedly put itself up for sale with no results in 2008 for the sum of $200 million.

YELP IPO Has Competitors

At this point, Yelp now has a Google backed Zagat as a competitor, which may have played a factor in rushing the Yelp IPO to market. Keep in mind that Yelp also reportedly turned down an offers from Yahoo (YHOO:NASADQ) and one from Google in 2009 for $500 million.

Now will this spell trouble for the San Francisco based consumer review company ? It all depends. As many of our followers know, we provide frequent quality color on new issues and secondary offerings. And we know from experience, that market conditions have as much to do with the first day pop as anything. Look at Pandora (P:NYSE) for instance. Yes, I know that P has been a dog, but the IPO had a monster initial pop despite common knowledge of their limited earnings visibility.

In other words, there is no reason to believe that a much more sound Yelp IPO wouldn’t be at least 20x oversubscribed if this market catches a bid, or even just settles down a little bit. If Europe crumbles or the U.S. economy doesn’t turn around Yelp can always pull the deal and consider takeover offers from companies like Microsoft (MSFT:NASDAQ) or revisit Yahoo. This is pure speculation, but it’s probably safe to say that both are still seeking additional quality content at the right price. Plus YHOO and MSFT currently have enormous cash reserves and Yelp is by most accounts, a market leader.

So check back for additional Yelp IPO updates as the actual pricing comes closer.

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GROUPON IPO Back For Investors

groupon ipo GROUPON IPOThe much sought after Groupon IPO seems to be on the calendar again. Unfortunately for Groupon, they were a little late to the party. Speculative internet companies like Pandora (P:NYSE) and Renren (RENN:NASDAQ) took advantage of the broader market conditions and a roaring IPO market and captured a first day valuation that is regretted by many investors who went long the respective names.
But that was the market back then, and we all have seen how quickly conditions change. During our last phase of IPO mania, Groupon had a valuation that was much larger than many of the recent past offerings. IPO services still expected shares of Groupon to be heavily oversubscribed with a sizable first tick premium that is usually only seen in smaller deals.
Now how will a Groupon IPO play out now ? Well that remains to be seen, especially since social media icon companies like Facebook and Zynga have pushed back their plans to go public in the near term. However, if Europe doesn’t implode, it’s probably still reasonable to say that a Groupon IPO could be at least 10 to 20x oversubscribed because of it’s name brand and impressive roster of VC investors.

GROUPON IPO Has Investors Busy

Just keep one thing in mind when the Groupon IPO trades. Shorts swarmed on LinkedIn (LNKD:NASDAQ) which is obviously a step up in quality from some of the hotter IPO’s that have traded in the past two quarters. So if Groupon trades in October or November as some are estimate, don’t get too excited for a monster aftermarket trade. Based on the recent trend, the talking heads will probably be constantly discussing the date when shares of Groupon will be available to borrow to short. They did it with LinkedIn and within 5 days, LNKD dropped more than 50 points from it’s first day high.
So for now, take the Groupon IPO hype with a grain of salt if you are expecting to only play it on an aftermarket basis.

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Carlyle Group IPO Has Investors Worried

Carlyle Group IPO Carlyle Group IPOA Carlyle Group IPO should catch the attention of the media and many investors. In the past the private equity firm has come under scrutiny from the left because the bin Laden family once owned a stake, ex President George H.W. Bush, and former Secretary of State James Baker also once served as advisors. Politics aside, the Carlyle Group is good at what they do. The L.P. posted an economic net income of over $1 billion in 2010.
But does the past success turn the Carlyle Group IPO into a hot deal ? Probably not. Just look at their peers. Fortress Investment Group (FIG:NYSE), Kohlberg, Kravis and Roberts (KKR:NYSE) and Blackstone Group (BX:NYSE) have not exactly been massive winners. As a matter of fact, KKR is the only one of the three that is actually up from it’s IPO price, and is only up a little less than 20% from it’s debut. Fortress has been an absolute disaster since debuting at $31. Shares of FIG are now below $4. BX is somewhere in between. The Carlyle Group IPO was priced at $35 and is now below $13.
As always with new issues, the demand from institutions and IPO flippers factor heavily into the first day pop or decline. Even though the Carlyle Group IPO is at least a few months away, due to the past performance of the sector, it’s hard to imagine that the Carlyle Group IPO will be any better than flat to up marginally on the first tick, and that’s probably being generous.

Carlyle Group IPO Shaky Investment

So don’t let the sexy Carlyle Group IPO story fool you if you are an IPO investor. Deals like this one are often only taken by institutions to run commissions up for research received. These same institutions often bail quickly and chalk the loss up as a cost of doing business.
Also, keep in mind that management at private equity firms are the brightest of the bright. So sharply reducing the price on a deal to make it attractive to investors is probably not in the game plan.
So be safe, while the Carlyle Group IPO may perform reasonably well like KKR, there will be better new issues to play.

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