The slate of 2011 initial public offerings is about to kick off into gear.  We have three top IPOs we will be closely watching this week.  In internet publishing we have a controversial offering from Demand Media (NYSE: DMD), followed by Nielsen Holdings (NYSE: NLSN) in media and traffic ratings and rankings, and BankUnited, Inc. (NYSE: BKU) in banking.

Demand Media (NYSE: DMD) has set its IPO between $14 and $16 per share and the pricing should come tonight for its 7.5 million shares being sold.  Of the offering, 4.5 million shares are coming from the company and 3 million are from exiting shareholders.  The offering is being led by Goldman Sachs and Morgan Stanley, followed by co-managers of UBS, Allen & Company, Jefferies, Stifel Nicolaus Weisel, RBC Capital Markets, and Pacific Crest.

Demand media is likely to have one of the highest market capitalization rates in years for an internet company.  The company has thousands of freelance writers and video makers for information and how-to articles or instructional content.  For 2009 and the nine months ended September 30, 2010, the company reported revenues of $198 million and $179 million, respectively; and losses for the same periods were $22 million and $6 million, respectively with operating loss of $18 million and $3 million.

There is some controversy here.  First, it pays its freelancers peanuts and Herb Greenberg of CNBC has pointed out over and over how the company has capitalized its content costs rather than taking the expense all at once as other content publishers in the industry.  Pricing is expected Tuesday night for Wednesday trading.

Nielsen Holdings N.V. (NYSE: NLSN) is soon to be back as a public company.  It has already gone private once.  The sale is for more than 71 million shares between $20 and $22 per share.  The expected $1.5 billion is going to be used to pay down its monster debt load of more than $7.5 billion.  Despite some concerns, this is going to be very important for all those pending private equity-backed IPOs that could come public this year.

J.P. Morgan and Morgan Stanley are the joint book-runners for Nielsen.  Nielsen was acquired in 2006 by a private equity-backed group including The Blackstone Group (NYSE: BX), KKR, and Thomas H. Lee Partners. Its top ten clients accounted for about 23% of the total 2009 revenues of $4.8 billion with a net loss of $427 million.  These private equity firms have piled on debt with high yields and the concern from many investors here is and should be focused on just how leveraged the post-IPO company is.  Pricing is expected Tuesday night for Wednesday trading.

BankUnited, Inc. (NYSE: BKU) is expected to price this week as well for its 26.25 million shares in an expected range of $23 to $25 per share.  The company is offering 4 million shares, while private equity holders are offering an additional 22,250,000 shares in the offering.  This is a re-IPO as the bank was taken over effectively out of bankruptcy.  This used trade under the “BKUNA” ticker.

There is a huge underwriting group: Morgan Stanley, BofA Merrill Lynch, Deutsche Bank, Goldman Sachs, KBW, RBC Capital Markets, and UBS. The new bank is a federally chartered and insured savings association out of Miami Lakes, Florida, with some $11.2 billion of assets, more than 1,100 professionals and 78 branches in 13 counties as of September 30, 2010.

Poor real estate loans and poor operations brought on the collapse the first time. Wilbur Ross acquired the bank from the FDIC in a pre-approved ‘restructuring’ package via WL Ross & Co. and investors in the deal are The Blackstone Group LP (NYSE: BX), Carlyle Group, and Centerbridge Partners.

These are not the only IPOs of the week but they are the three IPOs we are tracking as the most important.  We recently gave a forecast for 17 of the Top IPOs for 2011, and only BankUnited was not in there.  Frankly, it should have been.

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JON C. OGG

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