The IPO market can be the wild west for investors, a venue for great gains, and unfortunately great losses. I recently did an article where I looked at a few recent initial public offerings which hit the market last week, you can find that article here. In this article, I would like to take a look at a few offerings over the last couple months which have performed exceptionally poorly since making their public debuts. Some of these names you may be familiar with, while others may less visible.
I first wanted to take a look at a name many of use are familiar with, especially the travelers out there. Gogo Inc (NASDAQ:GOGO) is the leading provider of wireless internet in the airlines market with an impressive number of partnerships. Since pricing at $17 per share in late June, shares have tumbled 22.5% to $13.20. The company has aligned itself with the industry leaders including Virgin, American, Delta, United, airTran, and Frontier to name just a few. These great partnerships have allowed the company to gain a monopolist like market share of 81%.
The FCC helped create this monopoly through an exclusive ATG connectivity agreement with the company. In 2006, Gogo Inc (NASDAQ:GOGO) won the auction for the rights to the 3 MHz license for the ATG spectrum which will expire in 2016. However, the road looks rocky in the years ahead as competitors seek market share via additional spectrum and satellite connectivity. Should the company want to maintain its high price structure and market share, management would need to spend heavily on additional spectrum licences. I would avoid the company at this time as the clouds overhead should create a turbulent ride.
No one’s watching
Next up, Tremor Video Inc (NYSE:TRMR), an advertising company specializing in offering its clients engaging video advertisements across an array of devices. The company’s software enables its customers to use past data to maximize the results of future video campaigns. Since being priced last month at $10 per share, shares have declined over 20%. I have been a fan of video advertising for a variety of reasons, including higher brand recognition, purchase intent, and message association when compared to traditional television advertising.
BrightRoll, an advertising company, recently provided the results of its agency survey. BrightRoll found that 75% of advertising agencies found video advertising more effective than traditional advertising. As a result, the online video advertising market is expected to grow 41% in 2013 to $4.1 billion. Tremor Video Inc (NYSE:TRMR) stands in a great position to capture these additional dollars as the company’s proprietary products allow advertisers to better plan their video advertising campaigns. I would consider taking a speculative position here as it seems the recent sell off may be overblown.
Pay attention
Lastly, Ply Gem Holdings Inc (NYSE:PGEM), a leading manufacturer of building products in North America. Within the holding company, there are two major operating segments: Siding, Fencing, and Stone, Windows, Doors, which comprised 59% and 41% of sales, respectively. Since the initial public offering in late May, shares have traded lower by 14% from the pricing set at $21.
Shares actually priced above the expected level amid strong demand for anything related to the housing sector. It makes sense, as the housing recovery continues, revenue should benefit from both new home construction and foreclosure repair. I would stay away for a little while as the company still hasn’t proved it can generate profits, even through acquisitions. Two recent acquisitions have exasperated this problem during the short-term as the net earnings from the acquisitions is negative at $3 million. Moreover, if interest rates continue to rise as many are expecting, secondary housing plays may see weakness as exuberance for the sector fades due to lower demand.
I would avoid Gogo Inc (NASDAQ:GOGO) and Ply Gem Holdings as the future of both these companies remains clouded with a number of unpredictable variables. Investors should consider Tremor Video Inc (NYSE:TRMR) as the company provides targeted exposure to the in-demand video advertising industry.
The article A Few Recent IPO Misses May Offer Value, or Not originally appeared on Fool.com and is written by Nathaniel Matherson.
Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Nathaniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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