We published a research report that provided a preview of the QuinStreet (QNST-$13.14) IPO and noted that the main problem we saw was the too-high filing range. The mid-point at the time was $18 and didn’t leave much upside to our intrinsic value (IV) estimate of $21.
Subsequently the investment banks (Credit Suisse, Bank of America and JP Morgan) reduced the price to $15 and got the deal done at a more favorable valuation for investors.
It turned out that one fear outlined in the report regarding a concentration in the paid education space came home to roost thanks to some weakness in the shares of market leader Apollo (APOL-58) last Friday. That plus a little general market malaise has the shares now trading close to $13 which is starting to pique our interest.
Even though this offering wasn’t a great success for the company so far it has paved the way for more companies in this space to test the IPO waters.
Reply.com just filed for an IPO and based on the decent but lukewarm response to QuinStreet it may not be an easy one to get done unless the market improves from here.
We haven’t done the research work yet for an IPO preview report on Reply but given the current trading level in QNST we’d expect investors to be fairly price sensitive.
For anyone that missed our QuinStreet IPO Preview report it’s available free to R2 members (who register and are approved on the website) and for a small fee here for those not interested in registering.
In a tough market a recent IPO like QNST could fall to very attractive levels. Based on our analysis and their high profit margins it’s one to keep an eye on.