The 2012 IPO Calendar: How to Spot the Winners

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You might find yourself eyeing the 2012 IPO calendar with a bit more scrutiny after the Facebook (Nasdaq: FB) fiasco.

Although Facebook has been nabbing the most attention for disappointing its investors, it's hardly the first IPO to do so. It's all part of the fickle IPO process.

In fact, about 40% of the IPOs to hit the market over the past 12 months have seen their share prices fall below their IPO prices.

Facebook isn't the only factor to blame -- U.S. unemployment is up, the Eurozone debt crisis is sapping bullish spirit, and the upcoming U.S. presidential elections in November are adding to market uncertainty.

But avoiding IPOs altogether could also be a huge mistake.

Just ask those who bought the Google (Nasdsaq: GOOG) initial public offering. The Google IPO priced at $85, started trading at $100, and now trades around $560.

So how can you put yourself in the 60% group and earn a profit in the process?

With the right research and guidance, you can spot winners just like Google.

Do Your IPO Research

Investing in IPOs is like buying and selling any asset: due diligence is required.

An IPO, like a credit-default swap or subprime mortgage, is the ideal financial instrument for a limited set of circumstances. It is up to the individual or the institution to determine if the IPO they are considering is suitable for a long-term investment or a short-term flip.

If it qualifies as just a short-term flips, that is enough to tell you not to buy.

Whatever the investment objective, however, information is readily available for the necessary and needed due diligence.

For example, on March 17, 2011 Michael J. De La Merced wrote an article in The New York Times about the IPO of FriendFinder Networks (NYSE: FFN).

In his Timespiece,"FriendFinder Braves Choppy Market with IPO, Again," De La Merced did an excellent job of detailing his concerns with the stock, ranging from the disposition of the proceeds of the IPO to the accounting at the company to the number of times it had attempted to go public before and had to withdraw the offering.

FriendFinder Network IPO priced at $10 a share last year; it's now selling for around $1.15.

Other times an IPO can be hurt by factors having nothing to do with the financials of the company or the overall economic situation.

Take the Carlyle Group (Nasdaq: CG), a Washington, DC-based private equity group, which went public in May. Until Election Day in November, private equity groups will be vilified by the Obama Administration, unions and others due to Republican presidential candidate Mitt Romney's work with Bain Capital.

There is no way that can aid the share price of Carlyle Group. Now trading around $21 a share, Carlye Group has slipped from its IPO high of $22.45.

What's on the 2012 IPO Calendar

According to Nasdaq, companies recently filing to go public include iWatt Inc., Dane Exploration Inc., Cumberland Hills Ltd., Slavia Corp., and Sector 5 Inc. Not all of them could make it to markets though, so we'll have to stay tuned.

Those withdrawing recently include Enerken Inc., Luca Technologies, Banco Santander Rio, Nexsan Corp., and Customers Bancorp Inc.

One IPO that looks promising is LegalZoom.com, which offers document services for individuals and businesses to facilitate law-related matters.

According to Forbes, LegalZoom generated revenue of $156.1 million for 2011, which was up 29.2% for from $120.8 million in 2010, and posted net income of $12.1 million, up from a net loss of $4.0 million in 2010.

LegalZoom is profitable with rising revenue. It provides a service that is easy to understand. And it is seeking to raise less than the amount of its annual revenue. Those are good things.

Other bullish indicators for LegalZoom are that it will be listed on the New York Stock Exchange, which has more demanding requirements than other exchanges, and that Morgan Stanley (NYSE: MS) and Merrill Lynch, both very reputable firms, are taking it public.

That is the type of IPO that an investor should consider for a long position.

Despite the current poor conditions for IPOs, companies will continue to tap the capital markets by going public. There are too many advantages to an IPO, including stock market liquidity and financing flexibility, for companies not to pursue this avenue.

This is extremely profitable news for investors who conduct proper due diligence while studying the 2012 IPO calendar.

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