For all the initial public offerings investors hooked in 2006, the year may be best remembered for the ones that got away.
Just four Orange County companies did initial stock offerings last year. Early on, it looked like 2006 might be a breakout year,no fewer than a half-dozen companies filed offering plans with regulators.
But as the year went by, plans were scuttled as companies sold out or simply turned their backs on the market.
“In today’s climate, the bar for a real strong IPO is higher in terms of revenue size and market capital,you’re looking at $250 million in market cap and $150 million for revenue,” said Murray Rudin, partner at the Irvine office of Los Angeles-based private equity firm Riordan, Lewis & Haden.
Among local companies that did debut on Wall Street in 2006, Newport Beach-based Acquicor Technology Inc. was the biggest, raising $173 million.
Even so, Acquicor’s offering was half the size or less of the largest offerings in 2004 and 2005.
The sluggish local market for offerings came despite a good year on Wall Street.
The Dow Jones Industrial Average ended in record territory, gaining about 15%. Nasdaq finished the year up about 10%. The S & P; 500 grew 12%.
Nationally, 258 initial offerings took place in 2006, according to Renaissance Capital LLC. That was up 32% from 2005, when 194 companies went public.
Already for 2007, nearly 40 venture-backed offerings are in the pipeline, up from just 16 at the start of 2006, according to Mark Heesen, president of the National Venture Capital Association in Arlington, Va.
Money raised last year in public offerings should be the most since 2001, according to Ernst & Young LLP. Most of that came from a small number of huge offerings, such as MasterCard Inc.’s blowout $2.4 billion May debut.
The market wasn’t the issue last year, said Josef Schuster, founder and chief executive of Chicago’s IPOX Schuster LLC.
“The market has been up for the fourth consecutive year and it has returned about 20%,” he said. “That’s outperforming the main benchmarks. In terms of performance, there’s no problem.”
Wall Street had competition in 2006, namely private equity and corporate buyers flush with cash. They offered companies looking to go public an alternative way to raise money and cash out.
“There’s clearly more dollars chasing deals than there ever has been,” said Dan Lubeck, founder and managing director of Newport Beach-based Solis Capital Partners LLC.
One other factor: Sarbanes-Oxley.
The 2002 legislation has made it more costly to be publicly traded. For some companies, Sarbanes-Oxley could have been the tipping point in deciding whether to go public or take a private equity or corporate buyout.
“I don’t know that an IPO exit is the defining feature any more,” Solis principal Craig Dupper said.
In OC, Newport Beach-based Acquicor Technology led the pack last year with its March offering, raising $173 million.
Acquicor was an IPO with a twist. It’s a blank check company that went public to raise money to acquire another business.
Some technology heavyweights from Apple Computer Inc.,cofounder Steve Wozniak, former chief executive Gil Amelio and former technology chief Ellen Hancock,are behind Acquicor.
The company is in the process of buying Newport Beach-based contract chip maker Jazz Semiconductor Inc. The deal is set to close during the quarter.
The move is an indirect public offering for Jazz, which broke off from Newport Beach-based Conexant Systems Inc. in 2002 and twice filed to go public itself in 2004 and 2006.
Now Acquicor’s shares will trade as if they were Jazz’s.
The buyout appears to be a better option for Jazz. The company was looking to raise $105 million. Acquicor is paying $260 million for the company, after raising additional money in a debt offering.
Three other OC companies did initial offerings in 2006. They raised $93 million, bringing last year’s total raised to $266 million, including Acquicor.
In the past two years, six local companies have gone public, raising $753 million.
The busiest year in the past decade was 1996, when 24 OC companies went public. 1999 saw 14 companies go public.
Several companies backed away from offerings last year, a trend that began in late 2005.
El Pollo Loco Inc. said it expected to raise as much as $135 million in an offering to bankroll a national expansion.
By October, the Irvine-based Mexican food chain changed course amid a tough time for restaurants and sold to New York’s Trimaran Capital Partners LLC for an estimated $400 million.
Costa Mesa-based bed and bath retailer Anna’s Linens Inc. filed to go public in early 2005. The company sought to raise $69 million to pay off debt and expand its stores.
At the end of 2005, Anna’s pulled its offering without comment. The company has followed through on expansion plans, growing to 240 stores in 19 states.
Alsius Corp., an Irvine-based medical device maker, planned a $40 million offering last April but instead sold for about the same price to New York-based blank check company Ithaka Acquisition Corp.
Ritz Interactive Inc., an Irvine-based operator of e-commerce sites, pulled its planned offering in May, eight months after estimating it would raise $34.5 million.
The market’s still waiting on others.
Aliso Viejo-based medical device maker SenoRx Inc. filed to go public in May seeking to raise $85 million.
“Our intention is to go forward,” Chief Executive Lloyd Malchow said, declining to talk about timing. “As the market has improved over the last five to six months there’s a higher probability.”
Clean Energy Fuels Inc., a Seal Beach-based fuel alternative developer backed by legendary oilman T. Boone Pickens, estimated last September it would raise $287 million in an initial public offering. No date has been set. The offering would be among the largest for an OC company in recent years.
Late last year, Foothill Ranch-based nursing home operator SHG Holding Solutions Inc. filed plans to go public, looking to raise $175 million. SHG is the parent of Skilled Healthcare Group, which runs more than 70 nursing and assisted-living homes in five states. No date has been set.
Laguna Niguel-based software and device maker GenuTec Business Solutions Inc. filed to go public in August, hoping to raise $25 million. The company planned to pay down at least $5 million of $20 million in debt, according to regulatory filings. No date’s been set.
Buyouts snared two venture-backed technology hopefuls.
Irvine-based Avamar Technologies Inc., a maker of data storage products that had raised more than $50 million in venture money, sold to EMC Corp. for $165 million in November.
And Bitfone Corp. of Laguna Niguel said last month it’s being bought for undisclosed terms by Hewlett-Packard Co. Bitfone makes software for wirelessly updated mobile phones and has raised $70 million, including from Qualcomm Inc.
One other tech company did go public in a roundabout way. Irvine-based US Modular Corp., which sells memory products, went public through a reverse merger with a New York shell company.
US Modular bought Continental Beverage and Nutrition Inc. of Garden City, N.Y., which already traded on the low-profile Over-the-Counter exchange.
Nick Payzant, US Modular’s founder and chief executive, said the reverse merger and subsequent public listing could give the company greater access to funding. So far the stock’s seen little movement.
