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Monday, September 25, 2006

Street Warms Up to Bare Escentuals IPO

Bare Escentuals (BARE), a maker of mineral-based cosmetic products, is expected to come public at the end of the week. It is indicated as 16 million shares expected at $15.00 to $17.00 per share at the IPO pricing. Interestingly enough Bank of America has confirmed strong demand on the name. This may even come at a higher price and for a larger number of shares. This lists Goldman Sachs and CIBC World Markets as the joint book-runners;and co-managers are listed as Bank of America, Piper Jaffray, Thomas Weisel, Sanders Morris Harris, and SunTrust Robinson Humphreys.

The company sells through Nordstrom's, Sephora, Ulta, and at set boutique shops around the US. For its fiscal Jan 1, 2006 it had revenues of $259.29 million and net income of $23.89 million. Its first six-months ended July 2, 2006 showed revenues of $186.1 million and net income of $25 million. This has shown substantial growth when you consider it only had $94.6 million in revenues for ist Dec. 31, 2003 fiscal year, but it is not without risk. There are balance sheet discrepancies over the news SFAS rules and the counting of debt on an actual and adjusted basis. Either way, there is a substantial shareholder equity deficit as of now that is larger than that of many public companies. Womens' specialty retail cosmetics and apparel plays are often in this situation when they first come to market, so that isn't a death sentence in and of its own right. There is a large demand for this IPO, but we needed to give the whole picture.

Jon C. Ogg
September 25, 2006

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