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A 1963 Fender Telecaster Custom guitar belonging to John Lennon, right, is displayed in Paris in October, 2006. Fender Musical Instruments Corp. wants to sell about $150-million worth of stock. (Benoit Tessier/Reuters/Benoit Tessier/Reuters)
A 1963 Fender Telecaster Custom guitar belonging to John Lennon, right, is displayed in Paris in October, 2006. Fender Musical Instruments Corp. wants to sell about $150-million worth of stock. (Benoit Tessier/Reuters/Benoit Tessier/Reuters)

IPO market heats up in U.S. Add to ...

The Facebook disaster in May was widely perceived as putting the chill on the U.S. initial public offering market for the next several weeks.

Next week, however, the market warms up with several issues from familiar names, per the calendar from research firm Renaissance Capital.

None more so than Fender Musical Instruments Corp. of Scottsdale, Ariz., makers of the iconic guitars. Fender says it has has the number one position in the U.S. in electric, acoustic and bass guitars, and electric and bass guitar amplifiers.

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The company posted $700-million (U.S.) in 2011 sales but a razor-thin net income of $19-million.

The company seeks to sell roughly $150-million of stock at somewhere between $13 and $15 per share, which would put its market capitalization at more than $300-million.

Analyst Francis Gaskins of IPODesktop.com notes Fender wants to IPO at a premium to Harman International Industries Inc. in terms of price-to-sales, price-to-earnings and price-to book value.

“Fender can do that because it’s the number one company in its particular segment, and FNDR is an iconic brand with a loyal customer base,” Mr. Gaskins said.

Mr. Gaskins notes Fender has a high debt burden, with 64 per cent of operating earnings for the March quarter going to pay interest on debt. He still rates the IPO a “buy.”

One of the companies most spooked by Facebook’s post-IPO declines was, by some media accounts, Kayak Software Corp., which runs a travel-price-comparison website of the same name.

Now perhaps encouraged by the rapid run-up in prices this year for priceline.com Inc., TripAdvisor Inc. and Expedia Inc., the Kayak IPO will float.

The company plans to sell about $80-million of stock at a range between $22 and $25, which at the upper end could push its market value above $1-billion.

Mr. Gaskins also has a “buy” on Norwalk, Connecticut-based Kayak, which posted $245-million in revenue and just over $20-million in net income over the last 12 months.

“It was smart of Kayak to postpone its IPO on May 30 because it needed to get out of the way of the Facebook pricing disaster and the travel search group of Orbitz (OWW), Trip Advisor (TRIP) & Expedia (EXPE) continued to go up in the last month. As a group they are up 34 per cent, on average, in the last three months.”

Five Below seems to combine two hot retailing concepts: Products for teens and discount prices. All merchandise is - you guessed it - below $5.

The Philadelphia-based company hopes to rise $125-million at a price range of $12 to $14, which could put the company’s market cap above $700-million. The company broke even on just under $300-million in sales in 2011.

Mr. Gaskins says that compared to 10 other specialty retailers in the approximate same space, Five Below (at the price range mid-point of $13) expects to IPO at a premium relative to the other’s price-to-sales, price-to-earnings and price-to-book value ratios.

Other IPOs scheduled next week include the less-known Palo Alto Networks — which is the largest of the week, at $220-million, according to Renaissance Capital — and Durata Therapeutics, a New Jersey company that plans a $75-million offering to help it develop a treatment for acute skin infections.

 
  • HAR-N
  • PCLN-Q
  • TRIP-Q
  • EXPE-Q
  • OWW-N
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