It was pretty quiet on the initial public stock offering front last year.
Orange County saw just a pair of initial public offerings in 2005, down from five a year earlier, according to this week’s Business Journal list.
The ranking lists IPOs of locally based companies by offering size during the past two years. There was just one offering in 2003.
Wall Street didn’t provide much of a push for stock offerings in 2005.
The Dow Jones Industrial Average was off about 1%, with Nasdaq up only 1.4% and the S & P; 500 index 3% higher. Benefits of an improving economy were offset by interest rate increases, global instability and fallout from major hurricanes in the Gulf Coast region, market watchers said.
OC’s IPO slowdown reflected the national trend.
The U.S. recorded 194 initial public stock offerings in 2005, according to Greenwich, Conn.-based market tracker Renaissance Capital Corp.’s IPOHome.com. That’s 22 fewer offerings than in 2004, though nearly triple 2003’s 68 offerings and 2002’s 70.
The IPO total of the past few years is far short of 1999,the height of the dot-com boom. That year the U.S. saw 486 public offerings, with OC counting 14 IPOs. The county had 11 IPOs in 2000 and just one in 2001 before picking up to five in 2002.
The two debuts on this year’s list,Irvine-based subprime lender ECC Capital Corp. and Costa Mesa-based apparel maker Volcom Inc.,held traditional IPOs, in which a private company goes public.
That’s in contrast to recent years when many of the local stock offerings were for units spinning out of larger companies, such as Irvine-based Allergan Inc. offshoot Advanced Medical Optics Inc. of Santa Ana and several from Newport Beach-based Conexant Systems Inc.
Volcom and ECC Capital went in different directions after launching shares to the public.
Volcom, a maker of surf, skate and snowboard gear, had a blockbuster stock offering that ranked among the best nationally in 2005, according to IPOHome.com. Volcom raised $89 million in its offering.
Volcom’s Spike
The hip apparel maker saw its shares surge from an offering price of $19 a share to $26.77 on June 30, Volcom’s first day of trading. Shares since have risen to $34, giving Volcom a market value of $825 million.
The company used proceeds from its stock offering to fund a European expansion and boost marketing, sales and other corporate operations.
Investors cheered Volcom’s recent results. Third-quarter sales rose 38% from a year ago to $51.2 million, with operating profit up 58% to $15.4 million.
ECC Capital has had nothing but trouble on Wall Street since going public Feb. 15.
The IPO timing for the real estate investment trust, which invests in and makes subprime mortgage loans, could have been better.
ECC Capital raised $354 million in its offering, which was priced at $6.75 a share. But as the Federal Reserve continued its policy last year of raising interest rates to ward off inflation, ECC Capital’s shares continued to plunge.
The company closed the year at $2.26 a share.
ECC Capital, which lends to people with less than perfect credit ratings, lost about $15 million in the third quarter after factoring in a gain from its derivative investments.
The loss included an $8.8 million provision for losses related to Hurricane Katrina.
“ECC Capital is continuing to analyze its exposure to potential losses as a result of recent natural disasters,” the company said in a statement.
But rising interest rates were the big factor for ECC Capital last year.
On the whole, lenders have seen profits squeezed by the narrowing spread between short- and long-term rates. That’s because they borrow at short-term rates, which have been rising, and lend money based on long-term rates, which have fallen over the past two years.
The final weeks of 2005 proved to be a downer on the local IPO front.
Aliso Viejo-based Buy.com Inc. and Costa Mesa-based Anna’s Linens Inc. both pulled their planned stock offerings.
Online retailer Buy.com ultimately hoped to offer 4.2 million shares at $8 a share in its planned stock sale. The company initially had filed in early 2005 to raise $86 million in an offering, then cut the size to $54 million in late fall before again reducing it to $33 million.
Market Conditions
Lead underwriter Thomas Weisel Partners LLC cited weak stock market conditions for pulling the offering. Investors likely were lukewarm to a company that is losing money while posting only modest sales growth.
Anna’s Linens, meanwhile, nixed its offering two days before Christmas. The chain of low-cost bed and bath lines had filed in May to raise up to $69 million in a stock offering.
The company was set to use the funds to open more stores. Unlike Buy.com, Anna’s Linens was profitable, according to filings with the Securities and Exchange Com-
mission. The company posted income of $5 million on sales of $225 million for the 12 months through Jan. 30, 2005.
Also canceling its planned IPO last year was Newport Beach-based Jazz Semiconductor Inc., which pulled a $150 million offering in June.
The chipmaker is a spinoff of Conexant, which still owns a big chunk along with Washington, D.C.-based private equity investor Carlyle Group. Proceeds from a Jazz offering were set to help Conexant pay off some of its debt.
The company filed for its IPO in early 2004.
Dwight Decker, chief executive of Conexant, said last year that he hopes to refile for the offering, perhaps this year.
Costa Mesa credit bureau Experian Group is worth watching in 2006.
Experian is readying for a split from the company’s British parent, GUS PLC. It is one of OC’s largest businesses with sales of more than $2 billion annually.
The company is set to “de-merge” from GUS, though it hasn’t said when. The spinoff could include some kind of initial public offering.
Sunstone Solid Performer
2004 initial stock offerings were led by San Clemente-based Sunstone Hotel Investors Inc.’s $362 million deal. Shares of the company are up 56% from their first-day closing price of $17.
Anaheim-based Multi-Fineline Electronix Inc. has seen its shares rise 380% since the company’s first-day close in June 2004. The company makes circuit boards for wireless devices.
Losing ground has been power supply gear maker Cherokee International Corp. Shares of the Tustin-based company are down 72% since its IPO in February 2004.
Irvine-based online advertising company Interchange Corp. has seen its stock fall 25% since the company’s offering in 2004.
