Breaking Wall Street Market News & Reports

High profile IPO’s are scheduled to launch this week. Zillow (Z), Skullcandy to lead the IPO week. Francesca’s Holdings and SunCoke Energy also to IPO this week, likely will show a strong showing based on early demand and over-subscription levels, The heavy action may continue into next week, when the parent company of Dunkin’ Donuts and Baskin-Robbins is expected to make its debut in a deal currently expected to be worth about $400 million.

Zillow, (Z) operator of a popular online real-estate site, is expected to begin trading Wednesday on the Nasdaq Global Market under the ticker symbol “Z.” The company raised the estimated price range of its IPO on Friday, pushing the total value of the deal above $62 million at the high end. Zillow “is going to be the beneficiary of several Internet-based IPOs that have done extremely well such as LinkedIn, Yandex, & Pandora. The company plans to sell about 3.46 million shares at an estimated price range of $16 to $18 a share, a $4 increase from its original proposed price range of $12 to $14. Underwriters on the deal include Citigroup Global Markets Inc., Allen & Company, and Pacific Crest Securities.

Also expected to trade Wednesday is Skullcandy Inc., which makes headphones and other gear for portable electronic devices. The company plans to offer 8.3 million shares at a price range of $17-$19 per share. It plans to trade on the Nasdaq under the “SKUL” ticker symbol. Skullcandy, which had at one point planned to launch its roadshow in June, just days after the euphoric Pandora opening, is an interesting story as well. Skullcandy will command a market value of $514 million. Skullcandy, which was founded in 2003, booked $175 million in sales over the last 12 months. Unlike many young tech companies that would like to go public, it had been largely profitable since 2006, and generated just over $1 million in net income during the first quarter. Still, it has faced a couple of headwinds, including a huge loss of nearly $10 million last year. In addition, the recent resignation of Skullcandy’s founder and CEO, Rick Alden, after what the company’s public filings describe as complaints from employees and “improper workplace conduct.”

Specialty women’s clothing boutique Francesca’s Holdings Corp. is scheduled to trade on the Nasdaq on Friday under the symbol “FRAN.” It is expected to sell 10 million shares at an estimated price range of $14 to $16 a share. Similar specialty retailers have seen strong aftermarket performance since their launches. Vera Bradley Inc. (NASDAQ:VRA) is up 25% year-to-date, and Body Central Corp. (NASDAQ:BODY) is up 60% year-to-date. Francesca’s operates a chain of trendy women’s boutiques with 249 locations in 38 states, plans to raise $150 million by offering 10 million shares at a price range of $14 to $16. At the mid-point of the proposed range, Francesca’s Holdings will command a market value of $681 million. Francesca’s Holdings, which was founded in 1999, booked $151 million in sales over the last 12 months.The operator of Francesca’s Collections stores focuses on fashion-conscious 18- to 35-year-olds and designs locations ‘to feel like independently owned, upscale boutiques. Its debut plans come as Americans have been picking up their spending as the job market improves, yet unemployment is high in the U.S. and expected to remain so for some time. Consumers also face higher costs for gas and food. The luxury segment of the retail market has been a bright spot. Specifically, the company has about $41.4 million in proceeds from the offering earmarked toward repaying a senior secured credit facility. Remaining funds may be used for opening new stores and growing its e-commerce business. For the year ended Jan. 29, Francesca’s swung to a profit as sales jumped 70%. Same-store sales climbed 15% on top of a 9.8% increase a year earlier.

Based in the price range mid-point of $15 and annulazing the three months ended April 2011, FRAN is valued at 4.3 times sales, 35 times earnings and -83 times book value (because FRAN has a negative book value) Compared with others in the industry, FRAN’s price-to-earnings ratio of 35 is the highest, and its price-to-book value is the lowest.

Metallurgical coke producer SunCoke Energy is expected trade Thursday on the New York Stock Exchange under the symbol “SXC.” The Sunoco Inc. (NYSE:SUN) spinoff plans to sell 11.6 million shares at an estimated price range of $15 to $17. SunCoke Energy (SXC), the largest independent producer of high-thequality metallurgical coke in the Americas, plans to raise $186 million by offering 11.6 million shares at a price range of $15 to $17. At the mid-point of the proposed range, SunCoke Energy will command a market value of $1.1 billion. SunCoke Energy, which was founded in 1962, booked $533 million in sales over the last 12 months. The Lisle, IL-based company plans to list on the NYSE under the symbol SXC. Credit Suisse, BofA Merrill Lynch, and Goldman, Sachs & Co. are the lead underwriters on the deal.

Chinese Internet video company Xunlei Limited. is expected to trade Wednesday on the Nasdaq under the ticker symbol “XNET”. Xunlei Limited, which offers accelerated download software and online video services in China, plans to raise $114 million by offering 7.6 million ADSs at a price range of $14 to $16. At the mid-point of the proposed range, Xunlei Limited will command a market value of $1 billion. Xunlei Limited, which was founded in 2003, booked $47 million in sales over the last 12 months. The Shenzhen-based company plans to list on the NASDAQ under the symbol XNET. J.P. Morgan and Deutsche Bank Securities are the lead underwriters on the deal. Xunlei Ltd, a Chinese Internet platform company is partly owned by Google.

The core download acceleration functionality makes Xunlei Downloader the most popular download acceleration application in China, with a 78.7% market share based on the number of software launches among all download software in China in February 2011, according to iResearch. Xunlei Downloader was used in an average of approximately 138 million downloads per day in 2010. These downloads are available to internet users free of charge. To complement XNET’s download services and to further broaden users access to video content via online streaming, XNET also launched an online video streaming services in 2007 on the Xunlei Kankan website. Xunlei Kankan is the third largest video streaming portal in China, as measured by the monthly unique visitors from homes and offices in April 2011 according to iResearch. Xunlei Kankan had 120.7 million monthly unique visitors from homes and offices in April 2011. XNET’s target range of monthly unique visitors that XNET currently tries to maintain is from 110 million to 140 million. According to iResearch. Xunlei Kankan had 120.7 million monthly unique visitors from homes and offices in April 2011.

XNET generates revenues from multiple sources, including cloud-based subscription services, online advertising, and other services. Multiple revenue streams provide with both revenue diversification and multiple growth areas. XNET implemented its current cloud-based subscription service revenue model in March 2009 and, by the end of March 2011 had developed over 1.3 million subscribers from the large user base of Xunlei Downloader and Xunlei Kankan. XNET also generates online advertising revenues derived principally from various forms of advertisements that XNET places on Xunlei Kankan and Xunlei Downloader. The continued strong growth of subscription-based business in the first quarter of 2011, as evidenced by a rapid increase of the subscribers of XNET’s premium download-related services from 898,494 as of November 30, 2010 to 1,290,000 as of March 21, 2011; The launch of an iPad-version of Xunlei Kankan, a key strategic initiative which enjoyed immediate market acceptance upon release, is expected to bring new business opportunities to XNET. XNET entered into a series of exclusive content licensing agreements with content owners and secured the exclusive rights of two blockbuster movies in the first quarter of 2011. XNET entered into framework agreements with some major brand advertisers that further support the value of Xunlei Kankan as a leading online streaming platform.

XNET faces significant competition in different areas of its business. XNET’s Xunlei Kankan website competes with other major online video companies such as Youku.com (NYSE:YOKU) and Tudou.com. XNET’s Xunlei Downloader primarily competes with e-Mule, FlashGet and Tencent with QQ Cyclone (TCEHY.PK). Sohu.com (SOHU, $3 billion market cap) has committed to buying $10 million in a concurrent private placement that they will hold for at least 180 days. XNET has a ‘material weakness’ in its accounting systems it expects to rectify by the end of 2012. Even though top line revenue is increasing on a sequential quarterly basis, gross profit in the last six quarters has dropped from 78% to 61%, operating income has dropped from 18% to 15%, and net income has dropped form 20% to 13%. In the last three quarters net income declined from the September quarter ($2.7 million) to the December quarter ($2 million) to March the quarter ($1.9 million). At the price range mid-point of $15, XNET would sell for 41 times annualized March 2011 quarter earnings and 5.6 times sales. At the IPO price of $15 XNET may be a risky speculation in the short term.