The first quarter was OK for initial public offering activity, nationally and in the West—just not here.
There were 36 IPOs at $50 million-plus on the NYSE and Nasdaq through late March, up 44% year-over-year in sheer numbers, up 17% in IPO proceeds to $12.7 billion. The quarter was the best in the West since 2015, according to accounting firm Ernst & Young’s Global IPO report.
The lone OC company to make it out was Evolus Inc., selling 5 million shares at $12, netting $60 million for about 22% of the company; parent Alphaeon owns the rest. Evolus is developing a competitor to Allergan’s Botox, injectable PrabotulinumtoxinA (DWP-450). The Irvine-based drugmaker started trading on Feb. 8, and despite deal manager Cantor Fitzgerald setting a price target of $25, at press time Evolus had lost about a third of its market value, trading at nearly $9 per share. Evolus has finished all clinical studies and is waiting on U.S. and European regulatory approval.
Tim Rahall, assurance partner with Ernst & Young’s Irvine office, said there’s possibility for strong IPO activity this year. “There are a lot of high-growth companies doing well. Especially if the market stabilizes, we’re set for a pretty strong year.”
Rahall said it’s hard to predict which OC companies will go public this year because “we’re such a mix of industry.”
Last year was a banner one here by recent standards and highlights the mix Rahall references, including a $206 million IPO of building materials supplier Foundation Building Materials Inc., $303 million by trade show organizer Emerald Expositions Events Inc., and $338 million by developer Five Point Holdings LLC.
Rahall favors “something that’s disruptive,” and is bullish on healthcare companies working on new ways of treating people: gene and cell therapies, regenerative medicine.
San Francisco-based Dropbox was one of the first quarter’s IPO stars, going public on March 23 amid the turbulence. The developer of the file-sharing and syncing app netted $756 million, pricing above its S-1 filing range and trading higher from there to about $31 and a market cap of $11.2 billion at press time.
Rahall also sees brisk M&A activity as large companies stash up by dint of the 2017 Tax Cuts and Jobs Act, and bring money back stateside.
Of course, the big recent deals here have resulted in some of our biggest public companies getting acquired. Just last month, Aliso Viejo chipmaker Microsemi Corp. was gobbled up by Chandler, Arizona-based Microchip Technology Corp. for $10.2 billion.
And replacing those can be slow. “Not replaced right away,” Rahall said, “there’s a life cycle to it. But the talent is freed up.”
