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IPOFinancial.com's Menlow on IPO Outlook (Transcript)

David Menlow, president of IPOFinancial.com, talked with Bloomberg's Monica Bertran in New York on May 18 about Burger King Holdings Inc.'s initial public offering and the outlook for the company, and his expectations for IPOs of Vonage Holdings Corp. (VG) and MasterCard Inc. (MA) Shares of Burger King rose after a $425 million initial public offering allowed its private-equity owners to cash in on demand for stock in fast-food companies.

(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

BERTRAN: Well Burger King shares are on the rise after a $425 million IPO. But can Burger King keep investors' appetites.

So joining us now with a closer look at Burger King's initial public offering today is David Menlow, President of IPOFinancial.com. So, David, thanks for joining us and what about this Burger King IPO today, what's your view? I mean how people - how are people accepting it compared to what we've see recently, Chipotle and also Tim Hortons?

MENLOW: There's a very big component in this offering here that's been absent in the other two and that is private equity capital that came into this. So the proceeds of the offering weren't really going to do anything other than supposedly pay down debt and that debt was actually incurred by the company to pay the principals in the company. So this is just a way for them to get on the radar scope and, basically, start the exit strategy for the private equity funds.

BERTRAN: Do you think there are some obstacles ahead for this company as well, for Burger King as an IPO?

MENLOW: Yes, this has been a company that has a history of ``you're only as good as your last management team.'' And up until the last couple of years that has been a absolutely horrendous place to be is in Burger King.

And the team that came in and bought this company really bought it when it was on its knees. They brought it up to a certain level and the question is management is shifting again and people are wondering can they keep this momentum going.

BERTRAN: Other than that is there growth out there or enough of it for Burger King?

MENLOW: There is going to be growth. They have made tremendous inroads into the industry itself, but the play is obviously going to be to the international markets where all these fast foods chains are working. And it's going to be a quarter-by- quarter nail-biting situation for the shareholders.

BERTRAN: Let's talk a little bit about what else not only for Burger King but, as we mentioned, some restaurants recently came as IPOs. Do we expect any more of that to come now, the restaurant IPOs?

MENLOW: It's very possible that we could get something but certainly the Chipotle was a major score for the marketplace, I think the largest opening percentage gain of any IPO by far, more than double the second-place situation. But these are specialized situation. We shouldn't say that now we are in a rotation where every restaurant stock that tries to come into the marketplace is going to have a tremendous welcome. Not the case. Tim Hortons had a good opening but it wasn't on the scale of what we saw with Chipotle.

BERTRAN: Yes, I have actually the Burger King stock up here. We are seeing a little bit off of the highs of the session today. What about the overall market, are we seeing some of this maybe take its lumps from the overall market declining, not only today but over the last couple of days?

MENLOW: There's going to be a little bit of a cooling that will happen with some of the IPO investors. We're not at the point where everybody is saying let me have just one more IPO and then maybe that'll be it. This is just a little bit of let's be careful because if it goes too far on the down side investors are going to say they have to protect their core investments and IPOs are considered to be I guess extra benefit if you can get it in a good market.

BERTRAN: Now in a couple of weeks or actually next week we get Vonage and also MasterCard is coming up.

MENLOW: Yes, yes.

BERTRAN: So talk to me about Vonage first. What's the anticipation about Vonage?

MENLOW: Can we talk about MasterCard first?

BERTRAN: OK.

MENLOW: Vonage is not one of our favorite stocks at this point.

BERTRAN: Why?

MENLOW: We just don't like the structure of the entire deal. They have done a fabulous job as far as marketing and getting the name out. Everybody who listens to the TV in the background knows just from the commercial music that this is a Vonage commercial.

But you're talking about a company that is just putting itself right in the middle of a firestorm. Right in the prospectus it says very clearly that there area cable companies ?

BERTRAN: Yes.

MENLOW: ? out there that are going to compete, telephone companies that are going to compete. So this is really about take a deep breath and hope that they can make it for the next couple of years but we're not looking for this thing to do well at the IPO.

BERTRAN: Let me ask you about MasterCard because a lot of people are watching that one very, very closely and there's a lot of anticipation that that will not only come to market but really people will go after it and accept it will and the stock price would, you know, go up and appreciate once it gets to market. What's your thought on MasterCard? You like that one little bit better?

MENLOW: We like it a lot more. This is a stock that investors can really feel confident with. It is a stock that is not going to have a gang busters opening. It will be a strong opening but you're talking about the tortoise and the hare. This is a stock that is just going to continue moving forward and it's managed to fight off interest rate problems, the volatility up and down, and they just keep making money. So this is a real showcase situation coming to the market.

BERTRAN: David, for the rest of the year what do you think? I mean given what we're seeing in the stock market, once we get maybe past some of this what do you think for the rest of the year, still pretty strong in the IPO market?

MENLOW: Yes, it's going to be strong but it's still going to be a stock-by-stock selective situation. We're not going to go in to market rotation with the exception, obviously, of the energy stocks because as tired as people are seeing these IPOs being know that the fundamental still are very strong. But it will be strength on each individual situation. A lot of merger and acquisition activity that is now rolling back into the IPO market as, of course, they want to get their exit strategy themselves.

BERTRAN: Of course, thank you. David Menlow joining us in studio, president of IPOFinancial.com.

***END OF TRANSCRIPT***

THIS TRANSCRIPT MAY NOT BE 100% ACCURATE AND MAY CONTAIN MISSPELLINGS AND OTHER INACCURACIES. THIS TRANSCRIPT IS PROVIDED ``AS IS,'' WITHOUT EXPRESS OR IMPLIED WARRANTIES OF ANY KIND. BLOOMBERG RETAINS ALL RIGHTS TO THIS TRANSCRIPT AND PROVIDES IT SOLELY FOR YOUR PERSONAL, NON-COMMERCIAL USE. BLOOMBERG, ITS SUPPLIERS AND THIRD-PARTY AGENTS SHALL HAVE NO LIABILITY FOR ERRORS IN THIS TRANSCRIPT OR FOR LOST PROFITS, LOSSES OR DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THE FURNISHING, PERFORMANCE, OR USE OF SUCH TRANSCRIPT. NEITHER THE INFORMATION NOR ANY OPINION EXPRESSED IN THIS TRANSCRIPT CONSTITUTES A SOLICITATION OF THE PURCHASE OR SALE OF SECURITIES OR COMMODITIES. ANY OPINION EXPRESSED IN THE TRANSCRIPT DOES NOT NECESSARILY REFLECT THE VIEWS OF BLOOMBERG LP.

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