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TheStreet Open House

King Doesn't Kill IPO Demand: StockTwits

Stock quotes in this article: IPO, KING, YHOO, COUP

NEW YORK (TheStreet) -- The Candy Crush Saga hasn't completely soured investors on IPOs. Renaissance IPO ETF (IPO) was among the most discussed tickers on investing social network StockTwits Monday, despite last week's disappointing initial public offering of gaming company King (KING). Some investors are looking forward to the upcoming IPOs of a Mediterranean restaurant chain and a biotech firm with a promising cancer drug delivery system.

The enthusiasm for IPOs was somewhat surprising given the recent King performance. The company fell 15.6% on its first day of public trading. That was the worst first-day loss in 15 years, according to Renaissance Capital. Investors on StockTwits.com said King, which makes the blockbuster Candy Crush game, didn't warrant the $7 billion valuation implied by its $22.50-per-share IPO price. However, some investors also said the sharp selloff was overdone. The stock traded at $18.43 by midday Monday after rising 2% intraday.

$KING One game makes a TON of money.... is this negative or positive? Maybe we can draw more positives from it? Everyone so bearish here -- Jesse Beahm (@Beahmer) Mar. 31 at 01:23 AM

On Monday, investors looked forward to upcoming IPOs with less lofty valuations. Mediterranean restaurant chain Zoe's Kitchen set the terms for its initial public offering Monday that would value the company at around $221 million. The company plans to trade on the NYSE under the ticker ZOES. THE IPO price will be between $11 and $13. Zoe's is not profitable, but revenues are growing. The company posted a net loss of $3.7 million in 2013 as it has opened more restaurants. Zoe's now operates 111 restaurants, up from 21 locations and five franchises seven years ago. It made $116.4 million in sales last year and is growing at a compound annual rate of 38.1%, according to an SEC filing. That growth rate includes new stores. Comparable store sales grew at a more modest 6.9%. Still investors are excited.

Into it "@howardlindzon: Falafel IPO. @IPOtweet: Zoe's Kitchen sets terms for $70 million $IPO $ZOES -- Eddie DaRoza (@eddiedaroza) Mar. 31 at 10:40 AM

Cashtaggers also discussed Cerulean Pharma, a late-stage biotech company developing therapies for liver and ovarian cancer that exploit the large pores in tumors to deliver cancer drugs directly to malignant growths. Cerulean plans to list under the ticker CERU and to raise about $60 million with an IPO price of between $11 and $13 per share. Cerulean's implied valuation at that price is $180 million, according to Renaissance Capital.

Investors also continued to speculate about Alibaba's upcoming IPO price. The Chinese e-commerce and Web portal said earlier this year that it would debut on the U.S. stock exchange, perhaps as soon as April. Investors anticipate the company's IPO price to value it at around $140 billion.

Alibaba IPO S1 filing will reveal huge cash flow the company is generating. Probably $5B annual run rate and growing fast $YHOO $ALIBABA -- Patrick Walther (@patrick_walther) Mar. 31 at 01:20 PM

Yahoo! (YHOO) would be a major beneficiary of the Alibaba IPO. The struggling Web conglomerate has a 24% stake in the company. Nearly its entire $36 billion market cap is based on the projected worth of its Alibaba stake and Yahoo!'s current $5 billion in cash and equivalents. Yahoo! plans to sell as much as 40% of its stake.

Just started a small drip fund via my Loyal3 account for $YHOO. Bullish on $ALIBABA -- David Putnam (@david_putnam) Mar. 19 at 04:25 PM

Despite the excitement over Alibaba and other coming IPOs, the feeling among many investors is that the momentum that had fueled the earlier offerings of, say Coupons.com (COUP), which jumped 88% in its first day of trading, is now gone. Investors are too concerned about the macro-economic picture to bet on exponential-growth.

StockTwits? founder Howard Lindzon believes the 5% fall in $IPO during the past month shows how bearish investors have become on momentum stocks.

The blood red March in the IPO ETF tells you everything you need to know about momentum at moment http://stks.co/i0QyC $IPO -- Howard Lindzon (@howardlindzon) Mar. 26 at 09:12 PM

It remains to be seen whether Zoe, Cerulean or Alibaba's IPO will fully reinvigorate the momentum crowd. But, if the $IPO chatter is any sign, demand hasn't died.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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