Most Orange County initial public offerings in 2006 didn’t give much to talk about,except one: Newport Beach-based Acquicor Technology Inc.
Four companies went public last year, according to this week’s Business Journal list.
The list ranks local offerings in the past two years by offering size.
Nationally, 2006 started off strong, slowed a bit midyear with several IPOs pulled, and then saw a flurry of offerings toward the end of the year, according to Greenwich, Conn.-based market tracker Renaissance Capital LLC’s IPOhome.com.
According to IPOhome:
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– 2006 was the strongest year since 1999.
– Average returns were 26%.
– Three-quarters of all IPOs were profitable.
Nationally, there were 258 initial public offerings last year, according to Renaissance Capital. That’s up 33% from 2005 when 194 companies debuted.
Still, the IPO market has been nothing like that of the late 1990s,the height of the dot-com boom,when the U.S. recorded 486 IPOs in 1999.
The four OC companies raised a total of $266 million in their debuts, a little more than half that raised by two companies that went public in 2005.
Acquicor Technology clearly dominated the list of IPOs in 2006, raising $173 million in March. The company’s shares debuted at $6 apiece, and finished down 17% on Dec. 29. Acquicor counted a recent market value of $190 million.
The blank check company, backed by former Apple Computer Inc. executives,cofounder Steve Wozniak, former chief executive Gilbert Amelio and Ellen Hancock, Apple’s technology chief under Amelio,formed to buy a technology company.
It wasted no time shopping for an investment and found a big one right in its own backyard: a $260 million deal for Newport Beach-based Jazz Semiconductor Inc.
The deal, set to close this quarter, ends Jazz’s own on-again, off-again bid to go public.
In May, Jazz filed plans to raise $105 million in a public offering.
Two years earlier, Jazz had hoped to raise $150 million in an offering that never came about.
Washington, D.C.-based private equity investor Carlyle Group owns about half of Jazz. It acquired the stake at the time of its 2002 split from Conexant Systems Inc.
Conexant is set to receive about $100 million for its stake in Jazz.
Jazz, which makes chips under contract from Conexant and other customers, counts yearly sales of $200 million. It lost $11.5 million in 2005.
Jazz Chief Executive Shu Li said in an earlier interview that he liked the idea of raising money and going public via Acquicor,without the hassle and distractions of the company doing its own offering.
“With this it’s a much quicker and simpler way to (get) the company public,” he said. “The IPO requires a lot of bandwidth.”
Memory products maker Netlist Inc. debuted in late November raising about $44 million. The Irvine-based company opened at the low end of its offering, but quickly shot up some 35% at its peak of first-day trading.
Netlist, whose hallmark customer is Dell Inc., saw its shares finish the year up 20% to $9.72. Last week, it counted a market value of about $185 million.
Anaheim-based engineering company Willdan Group Inc. raised $29 million in its offering, also in November. Willdan priced at $10, the midpoint of its range, and hasn’t seen much movement since. The company counted a recent market value of $67 million.
San Juan Capistrano-based American Mold Guard Inc. priced at $5.50 in May, raising about $20 million in its offering. But the company has been a dud with investors. Shares are trading at about the same price and the company reported a third-quarter loss of $1.4 million. American Mold last week counted a market value of about $10 million.
As big as Acquicor’s IPO was for 2006, it paled next to Irvine-based ECC Capital Corp.’s offering in 2005. The subprime mortgage lender priced at $6.75 a share in February 2005, raising $354 million. It was the largest local offering of that year.
The company’s had nothing but trouble since it went public.
ECC’s been caught in an industrywide downturn as the housing market has cooled from its historic gains of the past few years. Its market value has plummeted to $119 million at recent check.
The subprime lender in October said it plans to sell its primary mortgage unit to Bear Stearns Residential Mortgage Corp. for a mere $26 million.
The deal was expected to already have closed, but hit some snags. It’s now expected to wrap up in the first quarter.
Investors, who are set to get a sizable dividend from the sale, likely see it as the best option amid a slowdown in mortgages.
The deal could signal a winding down of ECC. The company also said it could “explore strategic alternatives with respect to maximizing the value of its remaining assets.”
ECC and the other IPO of 2005, Costa Mesa’s Volcom Inc., speak to the volatility of taking a company public.
Hipster clothing maker Volcom debuted at $19 in June 2005 and surged some 40% that day, raising $89 million. The stock since has feathered back to about $30, with a recent market value of about $700 million.
Volcom posted strong third-quarter sales,they were up 19.3% to $61 million,and upped its 2006 revenue outlook by 27%.
Two words are haunting the IPO market: private equity and reverse mergers. Experts also say that other than varied market performance,as with ECC and Volcom,a few other things are at play: relatively low interest rates and more lenient loan practices by banks, making borrowing easier.
“It used to be private equity brought companies to market and then tried to get out of them,” said Josef Schuster, founder and chief executive of Chicago-based tracker IPOX Schuster LLC. “There’s so much money flowing into private equity now, they need to do something with it, so they’re getting into the buyout market.”
