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quote.com Quote Com's Overall Rating: Favorable Overall Score: +4 Lead Manager Name: Hambrecht & Quist Inc The company is a leading provider of placement services for full-time mid-level information technology professionals. hoovers.com Hoover's: Information technology workers can take the job hunt in stride with Stride & Associates' placement services. The company targets IT professionals earning between $35,000 and $90,000 and puts them with companies ranging from startups to FORTUNE 500 firms. Stride & Associates works on a contigency basis for its client companies: Employers pay for its services only if a candidate stays for at least 30 days. Stride & Associates has 15 offices in seven US cities and specializes in three broad areas: networking and communications, software development and implementation, and management information systems. Director Thomas Roberts owns about 56% of the company. 1998 Sales (mil.): $28.8 1-Yr. Sales Growth: 50.1% 1998 Net Inc. (mil.): $1.9 1-Yr. Net Inc. Growth: 312.2% 1998 Employees: 172 Will this IPO pop on the first day? Will it maintain a longer-term premium over its IPO price? Would it be better to try to buy it in the after-market if it falls below the IPO price (and avoid a forced holding-period and possible flipping penalty)? Or, should we entirely avoid this IPO? What factors should we look at when deciding whether or not to indicate interest in an IPO (especially, if the broker we use enforces a flipping policy, so it may be better to avoid a poorly performing IPO)? I've listed some of main factors I've found that influence the performance of an IPO as it comes "out of the gate". Please post your opinions and research (citing sources) on how this IPO stacks up against my criteria: 1. Quality of the Underwriter and How its IPOs Perform in the After-Market? An IPO underwritten by Goldman Sachs, Wm Blair, Merrill Lynch, or Morgan Stanley Dean Witter is almost always a big winner. IPOs from DLJ, Credit Suiss First Boston, H&Q, BTAB, and BancBoston RS sometimes work sometimes don't. An IPO from Volpe or Ing Baring should probably be avoided. 2. Is the Company the "First-Mover" in its Market Niche? Does the Company have a Unique or Patented Product? Does the company have strong branding awareness? For example, Etoys being the first to go public in its niche and being well-known to the online community is a great IPO performer. Being FIRST counts for a lot in this environment! PCLN has a patented product. STRM is the first to roll up the Spanish-speaking markets. 3. Size of the Float and Total Shares Outstanding? An IPO with a float around 2-4 million shares which then represents about 25% to 33% of total shares outstanding perform better than an IPO with 6-10 million or more shares in the float (e.g., BNBN, while underwritten by GS, floated 25,000,000 shares and broke its IPO price in the first week of trading). 4. The Pace of Revenue Growth and the Relationship between Revenue Growth and Growth of Total Costs. Also, Who are Company's Clients/Customers? IPOs, like MRBA, MKTW, MMXI, CMTN which all have strong annual (year-to-year) sales growth of 100% to 300% AND where Costs are NOT INCREASING at the same rate as sales (i.e., costs are either decreasing absolutely or are increasing at a slower pace than the increase in sales) performed better than IPOs with stagnant sales (e.g., ONES) or where costs were INCREASING FASTER than sales (e.g. NETO). Companies like INKT with important clients jump and don't look back. 5. Size, Growth Rate, and Nature of Company's Market Niche. Does the company operate in a rapidly growing or hyped market niche (e.g., dsl in 1999)? Does the company operate in the internet infrastructure market place? Lately, the IPOs with staying power have tend to emerge from the Internet infrastructure sector. Consider the after-market performances of well-known content providers iVillage Inc., iTurf Inc. and TheStreet.com Inc. All three stocks tripled in value in their debut sessions but have since lost most or all of those gains. Now consider the infrastructure companies: Healtheon Corp., Portal Software Inc., Bottomline Technologies Inc. and Brocade Communications Systems Inc.; high-speed Internet-access companies Redback Networks Inc., and Copper Mountain Networks Inc.; and Latin American portal company StarMedia Network Inc. Internet-infrastructure companies have been able to sustain their aftermarket gains because institutional investors view the stocks as long-term investments. 6. The Company's Early Backers (During the Venture Capital "Incubation" Phase) and the Major Stock holders? Again, the example of ETYS, which was funded by idealab!, Highland Capital Partners, and Sequoia Capital Partners (of Yahoo! Fame) comes to mind. IPOs with little prior backing may not be good long term investments. 7. Company Management-Have They Been Successful in Prior Ventures? Does the management have "star" or celebrity appeal? Cramer's notoriety on CNBC certainly helped TSCM to pop on its first day. 8. Lastly, How Much "BUZZ" or Hype is There for This IPO? What's the talk about this company on the chat lines, in the press, on CNBC? Are the majority of chatters saying it's a HOT one? Are there many posts and conversations going on about it? How active is the SI thread for this IPO? Is the word out that the issue is oversubscribed? I would be wary of indicating interest for an IPO which had few respondents on its SI or Raging Bull thread. It's highly unlikely that an IPO with a strong underwriter or strong sales or great name recognition would generate little interest in the SI threads. That would not be a good sign. Conversely, even if an IPO does get a lot of air-play, it does not guarantee strong after-market performance (e.g. BNBN), but it will shift the probabilities across several IPOs in your favor (i.e., you may have 2 small losers but the 3 moderate to big winners will give you a positive overall return). <><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><> Okay, so taking all the above into account, how does this new IPO offering stack up against my criteria? Should we buy into this one, or pass on it? Please post your ideas. Source for information about underwriter's performance: quote.com Source for information about the management team and their experience: sec.gov | ||||||||||||
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