The market for Initial Public Offerings is booming.  After seeing so many IPOs trade exponentially higher than expected in 2010, the market should continue to be strong in 2011.  We have created what was supposed to be a top ten list for the year.  There are so many great names here already in the IPO pipeline that this list came to seventeen key IPOs to watch in 2011.

Private equity tried to unload stakes in 2010 with mixed results.  Now that the capital gains tax and dividend tax rates have been extended for another two years,  there is a 24 month period with some breathing room.  We are also seeing many great venture capital-backed deals coming to market.

Below are the IPOs to watch:

1. AMC Entertainment Inc.

AMC operates 382 theaters with a total of 5,342 screens of July 1, 2010.  It generates roughly $2.7 billion in revenues and earned about $71 million in the last fiscal year.  Owners include J.P. Morgan Partners, Apollo, Bain Capital and The Carlyle Group. AMC  claims a pro forma average U.S. ticket price of $8.39 for fiscal 2010 versus $7.64 for the industry during the 12-month period ending March 31, 2010.  Its exposure to 3D and IMAX formats has also helped it maintain market share.  Its two top public competitors are Cinemark Holdings Inc. (NYSE: CNK), worth $2 billion, and Regal Entertainment Group (NYSE: RGC), worth $1.87 billion.

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2. Carbonite

Carbonite, the online storage backup for consumers and businesses, has raised roughly $67 million in various venture rounds, while its sales have doubled each year since its launch in 2006.  The company claims to have backed up some 80 billion files, with more than 150 million new files backed up daily. It also claims to have restored more than 7.2 billion files that would have been otherwise lost forever.  Inc. Magazine placed it as #9 on its Inc. 500 list for 2010 of the 500 fastest growing private companies.  With “the cloud” remaining a hot topic and with its annual basic plan starting at less than $55.00 a year, Carbonite should have a solid reception when it comes to market.

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3. Chrysler

Chrysler is the well-known distant number three of The Big Three.  The company was bailed by U.S  taxpayers, emerging from bankruptcy in mid-2010 under the operating control of Italian car maker Fiat.  After a solid General Motors (NYSE: GM) IPO and after a solid profitable turnaround at Ford Motor Co. (NYSE: F), an IPO filing in the coming months seems highly likely.  Even if the company wanted to stay under the Uncle Sam’s bailout umbrella for another year, the government seems to have been more keen on rapidly selling off its stakes in bailed-out companies. Fiat owns close to 25% and can increase its ownership to about 35% after certain performance hurdles. If it pays back the U.S. government for the bailout it can take as much as a 51% stake.  It projects $1.6 billion to $2.4 billion in operating profits with total sales of about 1.6 million units in 2011.

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4. Facebook

Facebook has taken over the world as the social networking giant since its launch in 2004.  CEO and founder Mark Zuckerberg is now a billionaire on paper and recent funding of $500 million from Goldman Sachs Group Inc. (NYSE: GS) put the valuation at a staggering $50 billion.  Suddenly, the Microsoft Corporation (NASDAQ: MSFT) investment of $240 million for a 1.6% stake and about $15 billion valuation seems like a steal.  Zuckerberg has said an IPO will be inevitable, but the time frame is ‘later,’ and he has tried to keep the act up that Facebook will not file for an IPO this year.  The SEC is inquiring about its sales of shares for insiders and over its finances due to the number of holders; the SEC requires companies with 500 or more shareholders to make financial filings almost the same as if they were a public company.   In the end, whether Zuckerberg wants to have it public or not, you could argue that Facebook is already partly public.

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5. Frac Tec Services Inc.

Frac Tec Services Inc. has already filed its paperwork with the SEC for its IPO, and it has even selected a rather large consortium of investment banks, including Credit Suisse, BofA/Merrill Lynch, Citigroup, Morgan Stanley, and RBC Capital to lead its public sale.  Frac Tech may not be a well-known name but it owns 22 hydraulic fracturing units and the equipment used for services on wells with hard to recover resources.  The company has grown rapidly since launch of operations in 2006.  Sales for the nine-month period ending September 30, 2010 already were more than $800 million.  Petrohawk, XTO and Exxon Mobil are among its customers.  A unit of Chesapeake Energy (NYSE: CHK) owns about a 25% stake.

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6. GNC Nutrition Centers

GNC Nutrition Centers may be public again.  This would not be its first time as a public company, and the sale is coming from Ontario Teachers’ Pension Plan after being acquired from Apollo Management.  GNC Holdings Worldwide owns and franchises 7,100  stores that sell vitamins, minerals, and other health products..  The 2010 IPO filing was for up to $350 million in stock, and it listed Goldman Sachs and J.P.Morgan as its lead underwriters.  Why might it not come public despite more than $1.7 billion in sales with operating income of $181 million?  Rumors have been out as recently as December that yet another private buyer may acquire it.

7. Groupon

Groupon is the social coupon website that seems to have taken over the world of online coupons.  The company recently rejected  a $6 billion acquisition attempt from Google Inc. (NASDAQ: GOOG).  The company believes it is worth more and it just secured a Kleiner Perkins Caufield & Byers (and others) round of venture funding of a whopping $950 million.  Google was actually criticized for considering a $6 billion acquisition for something it could already launch on its own for a tiny fraction of that high price-tag.  Some are looking for an IPO filing to occur in 2012, but this is one of the largest VC-raises ever and larger investments generally require faster returns.

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8. Harrah’s/Caesar’s

Harrah’s/Caesar’s is another IPO in waiting.  The private equity groups of Apollo Management, Texas Pacific Group, and Paulson now own the giant hotel and casino operations after a buyout of more than $17 billion in early 2008.  The company operates some 52 casinos in 12 U.S. states and seven countries.  The combined casino floor space is about 3 million square feet of gaming space and a combined 42,000 hotel rooms.  It also generated nearly $6.7 billion in revenues in the first nine-months of 2010 alone.  The problem with Caesar’s is that a late-2010 IPO filing for up to $710 million in securities had to be withdrawn due to soft interest.  It seems that the private equity owners may have to consider selling off units and taking more units public through time rather than making a large offering all at once.  Investors will buy casinos in the public market today, but very few new investors are willing to merely bail out private equity firms to take on highly leveraged companies.  As soon as Caesars can come public, it will.

Also Read: Airbus Secures Biggest Order in History From India

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9. HCA

HCA is the largest private hospital system in the United States.   It is said to be coming back to the stock market because private equity sellers want to exit their positions.  The IPO filing was for up to $4.6 billion in equity and it listed nine investment banks in its underwriting syndicate.  As of September 30, 2010, HCA operated 162 hospitals with a combined 41,000 beds and 104 freestanding surgery centers across 20 states.  In 2009, revenues were $30.052 billion, and net income was $1.054 billion. Some 97% of the company is owned by an entity called Hercules Holding II, which is owned by Bain Capital, KKR, and the private equity arm of Bank of America Corporation (NYSE: BAC).  HCA was taken private in 2006 during the private equity craze for some $21.3 billion plus an additional $11.7 billion in assumed debt.  It is hard to imagine that a hospital system would want to come public again after the healthcare debates of 2009 and 2010.

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10. Kinder Morgan, Inc.

Kinder Morgan, Inc. filed in late-2010 to come back to the public market after a buyout in 2006. Kinder Morgan operates close to 40,000 miles of pipelines and owns roughly 180 terminals.  CEO Richard Kinder owns close to 30% of the firm.  Other holders are affiliates of Goldman Sachs Group (NYSE: GS), Highstar Capital, The Carlyle Group, and Riverstone Holdings. Richard Kinder has helped lead enough returns for oil and gas investors that this is a no-brainer.  The first nine months of 2010 alone brought revenues of $6.2367 billion, operating income of $830.9 million, and its total assets were listed as $28.7488 billion.  It also paid out $650 million in 2009 and $700 million in 2010 to its investors.  Expect this to be one of 2011’s top IPOs as the IPO filing amount stated was for up to $1.5 billion in equity.

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11. LinkedIn

LinkedIn, a professional social networking company that competes against Facebook, is considering an IPO sooner rather than later in 2011.  The company claims some 90 million members in more than 200 countries with executives from all Fortune 500 companies as clients.  Venture investors include Goldman Sachs Group (NYSE: GS), McGraw Hills Companies (NYSE: MHP), and a unit of SAP AG (NYSE: SAP).   Multiple web reports indicate that J.P. Morgan, BofA/Merrill Lynch, and Morgan Stanley may have already been selected to lead the underwriting.  The whopping $50 billion valuation for Facebook just offered support for anything tied to social networking that is willing to come public.  LinkedIn shares have also been offered up for sale on the secondary market for private companies via SecondMarket.  As recently as last week there has been a private offering of a 50,000 share stake being offered out for a price of more than $1 million.

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12. Nielsen Holdings

Nielsen Holdings is the top audience tracking and measurement provider for most forms of media. It was acquired in 2006 by a private equity-backed IPO and owners are listed as The Blackstone Group (NYSE: BX), KKR, and Thomas H. Lee. Its top ten clients accounted for about 23% of the total 2009 revenues of $4.8 billion with a net loss of $427 million.  The size of the offering has risen slightly in the filings and now sits at an expected “up to” $1.81 billion. The current time frame for an IPO is as soon as the last week of January.

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13. Skype

Skype is going to be an IPO to watch in 2011.  The VoIP telephony and communications provider founded in 2003, was acquired by eBay Inc. (NASDAQ: EBAY), and then mostly sold to Silver Lake, Joltid, and Skype founders.  eBay holds close to 30% of the company.  The company has already listed Goldman Sachs, J.P. Morgan, and Morgan Stanley as its top investment bankers for the deal, and it has made amended S-1 filings.  The figures may have updated since, but Skype grew its registered user base from 397 million to 560 million from June 30, 2009 to June 30, 2010.  At the same time, it grew its average monthly connected users from 91 million to 124 million but the catch is that average monthly paying users grew from 6.6 million to 8.1 million users.  That is a small fraction of the users supporting the whole infrastructure.  Still, In the first six months of 2010 saw $406.2 million in revenue, with Adjusted EBITDA of $115.8 million, and it claimed net income of about $13.1 million.  The risk here is not so much its user base, but whether or not the company can avoid another embarrassing outage like it experienced in December.

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14. Spirit Airlines

Spirit Airlines appears to be the next airline coming public and the filing indicates that Spirit will be a public company in the first or second quarter of the year.  The IPO filing is for up to $300 million and it already has Citi and Morgan Stanley listed as its lead underwriters in the offering. For 2009, operating revenues were $700 million and operating income was $111.4 million; during the first nine-months of 2010 its revenues were $562.7 million and its operating income was $44.5 million. The company now serves 40 airports.  The company has committed to more aircraft deliveries through 2015 that will add 36 new A320-aircraft to its present fleet of 32 planes broken down as being 26 A319, four (4) A320 and two (2) A321 aircraft.  That puts its expansion goal of being more than 100% fleet growth over the next three-plus years.
15. Toys “R” US

Toys “R” US filed for an IPO back in May of 2010.  The latest filing was for up to $800 million and the underwriting syndicate included  more than ten investment banks.  Toys “R” Us is the largest specialty toy retailer.  It has been public before and is private equity-owned under Bain Capital, KKR, and Vornado Realty.  As of July 31, 2010 it operated some 1,363 stores and it and licensed an additional 211 stores.  For 2009, its net sales were $13.6 billion with net earnings of $312 million.  The figures for its 2010 calendar year (January, 2011 ending) will likely be better because of some 600 or so pop-up stores that were meant to capture more of the holiday revenues without the expense of keeping those locations open during the rest of the year.  This one is scheduled but a date remains elusive for 2011 as of yet.

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16. Zipcar Inc.

Zipcar is on its way to coming public.  The company specializes in short-term hourly unit car rentals from members.  It operates in 14 major metro areas and lists more than 225 college campuses in the United States, Canada and the United Kingdom.  The IPO is expected sooner rather than later, and Zipcar has selected Goldman Sachs and J.P.Morgan as its lead underwriters.  The company is losing money. Its first nine-months of 2010 brought $134 million in revenue.  The company claims more than 530,000 members which it calls “Zipsters” and it had a fleet of more than 8,500 autos owned or leased as of September 30, 2010.  Backers are Steve Case’s Revolution Living, Benchmark Capital, Greylock Partners, and Norway’s Smedvig Capital.  Zipcar also recently expanded into the United Kingdom to get its foot into Europe where so many drivers do not own cars.  The company also claimed that it has identified another 100 markets here in the United States, and it showed a study from January 2010 from Frost & Sullivan showing that car sharing program revenues in North America will increase to $3.3 billion in 2016 from only $253 million in 2009.  The green angle is the claims that each new Zipcar ordered takes 15 to 20 vehicles off the road.

Also Read: Google’s App Store Growth Eclipses Apple’s

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17. Zynga Inc.

Zynga Inc. will be a key IPO prospect to watch.  The company has deep ties to Facebook as it makes many of the top social games from CityVille and FarmVille to Mafia Wars and more.  The company claims some 1,300 employees, 215 million active monthly users, and over 50 million daily active users.  It competes against Digital Chocolate and has raised more than $200 million in venture backing from the likes of Digital Sky Technologies, Kleiner Perkins Caufield & Beyers, Andreessen Horowitz, Avalon Ventures, Tiger Global, and more. The company’s finances are still not fully known but its non-Facebook interface is also there for iPhone, MySpace, Android, Yahoo! and more.  As far as its strange name, that is “a nod to a legendary African warrior queen.”  If you want to know at least one of the companies which has disrupted the traditional video game sector growth, Zynga is one of the biggest culprits of them all.

Jon Ogg

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