It was a blockbuster year for initial public offerings in Orange County last year,well, at least by recent standards.
OC saw five IPOs in 2004, up from 2003’s single offering, according to this week’s Business Journal list. The ranking lists IPOs of locally based companies by offering size in the past two years.
Newcomers on this year’s list all are traditional IPOs, unlike recent years when spinoffs or divestitures were more common. The one holdover from 2003,Mindspeed Technologies Inc. in Newport Beach,was a spinoff from Conexant Systems Inc., also of Newport.
The pickup in activity is a product of several factors, including a crop of maturing OC companies, solid gains on Wall Street and an improving economy.
The OC 50 index, a list of OC companies with a market value of at least $250 million tracked by Roth Capital Partners LLC, climbed about 11% last year. The S & P; 500 index grew at a slightly slower pace,9% for the year.
There has been a revival of IPO activity nationwide.
The U.S. recorded 216 IPOs in 2004, according to Greenwich, Conn.-based market tracker Renaissance Capital Corp. That’s more than triple 2003’s 68 offerings and 2002’s 70. The national numbers still fall far short of 1999,the height of the dot-com boom,when the U.S. saw 486 public offerings. OC recorded 14 IPOs in 1999, then fell to 11 in 2000 and just one in 2001.
As for 2004, OC offerings were mainly technology and healthcare-related affairs. An exception was the big one: San Clemente-based Sunstone Hotel Investors Inc. In October, Sunstone raised $413 million in its public offering. The stock sale was linked to the hotel operator’s restructuring into a real estate investment trust.
The timing was good. REITs fared better than the overall market in 2004. The Wilshire REIT Index fund rose 25% last year. Sunstone shares have performed well, rising 22% from a first-day close of $17 to $20.8 as of Dec. 31.
The company owns 77 hotels in 23 states. Locally, Sunstone owns the Hyatt Regency Newport Beach.
The public markets aren’t new to Sunstone. It was a publicly traded REIT from 1995 to 1999, when the company was taken private in a buyout led by Chief Executive Bob Alter and New York-based Westbrook Partners LLC.
REITs don’t pay taxes on profits given to shareholders as dividends. The catch: They’re required to give at least 90% of their net income to investors.
Sunstone wasn’t the only IPO coming out of San Clemente. IntraLase Corp., also based in the South County city, raised $99 million in its August IPO.
IntraLase makes lasers and software used in vision-correction surgery. The company’s IntraLase FS device creates a flap on a patient’s cornea, the first step in fixing vision in laser surgery.
The company put some of the proceeds from its offering toward expanding sales and marketing and research. IntraLase could look at other types of eye surgery products, such as those for cataracts, as potential acquisitions.
IntraLase was founded in 1997. The device maker raised more than $70 million in venture capital funding from firms including Domain Associates, which has offices in Laguna Niguel and Princeton, N.J., and Versant Ventures, with offices in Newport Beach and Menlo Park.
IntraLase’s stock was up 44% to $23.5 through Dec. 31. The second-biggest IPO on the list was from Tustin-based Cherokee International Corp., a maker of power supply gear.
Cherokee raised $110 million in a February IPO. The proceeds largely went to pay back company debt.
The company has had a rough time on Wall Street since its debut, with shares falling 42% to $9.6. Cherokee was hit hard in October after warning that sales and earnings would be lower than expected in the third quarter. The culprit: weakness in sales to one customer, Nortel Networks Corp.
One of this year’s public offerings flew under the radar. Anaheim-based Multi-Fineline Electronix Inc. held a little-noticed initial public stock offering in June, joining fellow circuit board makers TTM Technologies Inc. of Santa Ana and DDi. Corp. of Anaheim, which already are publicly traded.
Multi-Fineline raised $56 million in the offering. The company makes a special kind of circuit board that is flexible. It sits inside flip-open wireless phones. Multi-Fineline officials attributed much of its recent growth to supplying boards to wireless phone makers. Other products go into personal digital assistants and bar code scanners.
In Anaheim, Multi-Fineline operates out of 160,000 square feet of space with about 600 workers. The operation is home to the company’s executives and engineering operation. Multi-Fineline also does quick turnaround of circuit boards in Anaheim.
The company’s shares were up 82% to $18.2 since the company’s offering,the second-biggest gain of the companies on the list.
The hottest IPO last year was that of Laguna Hills-based Interchange Corp., which runs a paid Internet search service. The company raised $25 million in its November IPO.
Interchange’s shares quadrupled from a first-day close of $7.4 to $30.7 in the few weeks following its IPO. But trading has cooled some, with shares trading hands at $18.2 on Dec. 31. Trading activity has been very active and its chat board on Yahoo! Finance recalls those during the Internet boom of 1999.
