NEW YORK (
) -- The IPO market has kicked into high gear this week with deals ranging from $90 million to above $600 million making debuts.
These freshly minted public companies cover a broad spectrum of industries, from the high tech smart board company SMART Tech to old school coal producer Oxford Resources Partners. There's even a relisting of a private equity pioneer thrown in for good measure.
But while the influx of offerings is good news for investment banks raking in fees and the companies themselves, investors haven't done so well with IPOs in the past year. The Renaissance Capital IPO Index is down 3.5% year-to-date and delivered a negative return of 8.3% through the end of the second quarter.
In its quarterly analysis of the IPO market, Renaissance Capital noted conditions were returning "to more normalized issuance levels" with 60 new IPOs added to the index in the first half of 2010 alone. The best performance was turned in by telecom companies and the worst performers were financial companies.
Independent IPO Analyst Francis Gaskins breaks down each offering coming to market this week, including two making their debut on Thursday). There are pros and cons for each company and the biggest isn't necessarily the best. Investors should always ask themselves "Why is the company going public?"
The answer usually foretells whether it will be a good deal or not.
5. KKR & Co.
Technically, this isn't even an IPO. It's actually a re-listing from Europe to the U.S. markets with an added $500 million capital raise expected to be thrown in for good measure. But this iconic private equity firm has been looking to join rival
The Blackstone Group
on the Big Board for a while, and it has finally gotten the job done.
Doing a quick comparison of market capitalization to assets under management, Gaskins says KKR already looks to be selling at a premium to Blackstone, which went public at $31 a share back in the summer of 2007, and is now changing hands at a little above $10. KKR shares were up less than 1% in early trades.
4. Oxford Resource Partners
Oxford Resource Partners is a large producer of surface mined coal. This IPO has the most risk attached to it. Gaskins points out that Oxford plans a very generous quarterly distribution of $0.4375 per unit. Oxford says it will have $44.1 million in cash available to make the distribution. That forecast assumes the company will have $22 million from cash on hand to draw from. Once the distribution is made only $7.3 million will be left in cash on hand.
But the company didn't generate this much available cash in 2009, so these cash forecasts are very aggressive. The company had to lower its planned offering to $166 million from $175 million, and it's already tabbed nearly 80% of what it expects to raise in the sale to repay debt and give back to sponsors. Looks like they may be cutting things a bit close on the cash side, Gaskins says.
The stock began trading on Wednesday, pricing 8.8 million shares at $18.50 each, according to the
, to raise a little less than $162 million. Shares were recently changing hands at $17.92, down 4 cents.
3. Qlik Technologies
Qlik Technologies provides Web-based reporting tools for customers to make decisions and analyze data for reports. The key positive for this company according to Gaskins is the 90% gross margin.
The only problem is that the company spends an enormous sum on marketing expenses. Apparently, it has worked so far. The customer base grew from 2,000 in 2005 to 14,000 in March 2010 and revenue increased 59% during the same period. Still, the competition in this space is fierce with deep pocketed companies like
Qlik is coming to market on Friday. It's targeting $100 million in capital and the shares are expected to price between $8.50 and $9.50 each.
2. SMART Technologies
At more than $600 million, this is the biggest IPO to hit the market this week. This company makes the interactive white boards that your tax dollars have bought over the last few years for your kids' schools. It has an enviable 48% market share worldwide and 61% in the United States.
Gaskins says a real worry for SMART is the effect of the recession on municipalities and cutbacks in school budgets. If schools decide the boards are an unaffordable luxury and stimulus money dries up, it may not be able to keep delivering huge revenue growth.
The stock began trading Thursday, pricing at 38.8 million shares at $17 each, the midpoint of the expected range.
RealD is the real deal this week. This market leader for 3D movie technology has done very much with very little. With only 78 employees (38 of which are scientists), the company has deals with 17 of the top 18 motion picture exhibitors, and its RealD Cinema Systems are deployed on 5,966 screens, more than all of its competitors combined. Unfortunately, the company has a fairly extensive history of losses.
The bright side? Revenue appears to be skyrocketing so fast that those losses are expected to go the way of 2D. Gaskins is not too worried about the expiration of some patents. He is more impressed with the per-admission revenue generated off the movies and the potential for expanding into the gaming sector.
RealD is expected to make its debut on Friday. It's looking to sell $150 million worth of stock within a price range of $13 to $15.
Written by Debra Borchardt in New York
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.