Some OC Companies Have Dared
Stock Offerings While Others Wait
The spigot for public stock offerings may be drying up in the rest of the country, but for Orange County companies, there still are some pools of optimism.
Three OC companies undertook initial public offerings in the second quarter, compared to two in the first quarter, according to a list compiled by Newport Beach-based Roth Capital Partners Inc. In the past six weeks, two other OC companies issued secondary offerings of their shares.
Meanwhile, nine companies looking to go public are waiting in the wings, hoping for a firming in the still-soft IPO market.
“They’re keeping the offerings pending to see what happens,” said Mike Flynn, chairman of the corporate department for investment law firm Stradling Yocca Carlson & Rauth in Newport Beach. “If the market does turn for the better, they’re ready.”
Nationwide, there’s been a drop in IPOs since the spring market downturn. According to the market research firm CommScan LLC, 116 IPOs were launched nationally in the second quarter, down from 153 in the first quarter.
In Orange County, two companies,NexGenix Inc. and Iteris Inc.,withdrew pending IPOs while Interpore Cross International withdrew its secondary offering.
“We didn’t want to go out at a time when it was so turbulent in the market,” said S. Don Ganguly, co-chairman and co-chief executive of Nexgenix, an Irvine provider of electronic business services. “We’ve been around for 10 years. We’re not in a hurry to make it happen and take a bad haircut.”
Nexgenix still could go public later this year, Ganguly said.
“It would be very easy to re-file and get it back,” he said. “We talk to bankers every week, and if things start getting better, we’ll go out and get it.”
For those companies that had IPOs in the second quarter, results were mixed.
The star performer is Anaheim-based DDi Corp., a contract electronics manufacturer, which debuted at 13 1/2 on April 12 and raised $168 million. As of July 5, DDi shares were up to 28 1/2, an 111% gain, giving the company a $1 billion market capitalization.
Pacific Mercantile Bancorp, the Newport Beach-based holding company for Pacific Mercantile Bank, raised $20 million in its June 23 IPO. Shares of Pacific Mercantile Bank previously had been traded, but after a reorganization, Pacific Mercantile Bancorp held an offering of its own. Since then, its shares have gained 10%. (See story, page 4.)
Shares of Irvine-based Exult Inc., which raised $60 million in its June 2 IPO, debuted at 10 1/4. Late last week, the company’s shares were below their offering price at about 9 and 35% off their high of 12.
Secondary Offerings
Two OC public companies raised money with secondary offerings recently. Microsemi Corp. of Santa Ana raised $42.5 million on May 31. Its stock has gone up 28.5% since then.
FutureLink Corp. of Irvine raised $42 million in a secondary offering last week. When the company announced the offering on June 29, unhappy investors sent the stock downward. Last week, FutureLink shares were trading at about 6, down from 8 before the offering announcement. Separately, on June 30 FutureLink landed a $10 million investment from Microsoft Corp.
Still-pending Orange County IPOs are: Flashcom Inc. of Huntington Beach; Ista Pharmaceuticals Inc. of Irvine; LeadersOnline Inc. of Irvine; Ribapharm Inc. of Costa Mesa; Simple Technology Inc. of Santa Ana; National Specialty Networks Inc. of Brea; Lantronix Inc. of Irvine; Megaspector Inc. of Irvine; and Zland.com of Aliso Viejo.
One IPO hopeful, ETM Entertainment Network Inc. of Costa Mesa, plans to file for bankruptcy liquidation instead.
Filing For Extensions
After filing for an IPO, companies have 90 days to go public. They can file for extensions for up to nine months. Many companies put off IPOs because of marketing problems their underwriters may run into. Delaying rather than calling off an IPO can save a company money: Interpore Cross International of Irvine in May said it would take a $300,000 charge for withdrawing its secondary offering bid.
But with an extension, executives have to watch what they say during the run-up to an offering to avoid the appearance that they’re hyping a stock.
“By having the registration, it limited us from talking about the company,” said Anne Warde, spokeswoman for Iteris’ parent company, Anaheim-based Odetics Inc. “Right now, we’re seeking other sources of financing.”
Ganguly of Nexgenix said his company might be leaning toward an IPO in the fourth quarter. That’s because fund managers who have been hammered so far this year might be looking for a quick fix to their year-end results.
“Everybody’s looking at the fall as a good time to go out,” he said. “The fund managers have to go to the IPOs if they’re going to get their bonuses.” n
