By David Sterman of StreetAuthority
NEW YORK (StreetAuthority) -- One of the curious aspects of the recent rebound in the initial public offering market is the heavy slate of China-based companies in the mix. It remains pretty hard for U.S.-based companies to line up a deal, but investment bankers have had little trouble if the word "China" is part of the offering.
But bankers may have a hard time lining up more China-based deals in the near term. Many of the recent IPOs have traded down after their debuts, even after those debuts often saw a lowered offering price to make a deal happen.
Why the underwhelming performance? First, Chinese stocks have come under pressure recently as concerns build that the Chinese economy is overheating. Second, there seems to be little "after-market support." Typically, analysts at a firm's underwriters tend to talk up a stock once the quiet period is over. Yet investment research support has been scant for many of these recent China-based IPOs. As a result, many of them are now down 25% or more form their offering price.Let's look at each of these lagging IPOs to spot the best rebound candidate.
Mecox Lane Note to the executives at Mecox Lane (MCOX), the Chinese retailer and e-commerce play: "Welcome to the United States, where you pull off an IPO, deliver disappointing results, and then get hit with a wave of vulture-like lawsuits claiming wrongdoing." That happens whenever a stock takes a big hit, but it must be jarring to foreign firms nonetheless. Mecox Lane targets young urban female shoppers with a range of discounted clothes and furnishings through its Web site and nearly 200 stores. The company recently reached $200 million in annual sales and is just now profitable. In late November, Mecox reported third-quarter results and issued fourth-quarter guidance that were OK, if uninspiring. Investors were a bit spooked by a spike in expenses that led to gross margins that were a few hundred basis points below levels seen in previous quarters. Unfortunately, we've often seen companies that seemingly have great quarters going into an IPO, and less-than-stellar results soon after they go public.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV