Orange County’s roster of locally based public companies with billion-dollar valuations isn’t getting much help when it comes to offsetting some high-profile departures.
A chief culprit: the largely dormant initial public offering market, which is keeping potential entries to the public sector on the sidelines—or exploring other strategic options.
Only one company on this week’s list of OC’s largest public companies tapped the IPO market via traditional means since the start of 2015: Glaukos Corp., a Laguna Hills medical technology company that raised about $118 million in its offering.
At its highest stock price, shortly after the June IPO, Glaukos had a market value of just over $1 billion, a mark that only 18 companies on this week’s list of top public companies can top.
Glaukos’ shares have since fallen some 40%, giving the company a market value of about $620 million last week.
That decline stood out in what was generally considered to be a dismal year for IPOs last year.
The average 2015 IPO is down 4% from its offering price, while nearly 60% of last year’s new offerings had dropped below their prices as of last month, according to data from Renaissance Capital LLC, a Greenwich, Conn.-based IPO research firm.
Yet 2015 is already looking like a banner year compared to this year, especially in terms of new IPOs brought to market.
The market for private companies taking their stock public is facing its slowest period since the depths of the recession in 2009, with only nine IPOs in the U.S. pricing in the first four months of this year.
Those nine companies raised about $700 million in total from their respective IPOs.
There were 49 IPOs in the same period last year—raising close to $5 billion—and another 94 priced in the first four months of 2014, according to Renaissance Capital’s data.
Factors contributing to the dearth of IPOs now coming to market include a downturn in investor sentiment that picked up steam toward the end of last year, concerns over China’s economy, which is seen as a potential drag globally, the overall sell-off in the U.S. stock market in the first quarter, and generally poor recent IPO performances.
Few Replacements
The dry IPO market comes as Orange County’s field of publicly traded companies enters a new era—a shift that comes into focus in the list of the 100 largest based here, which anchors this week’s Special Report (see list, starting on page 10; related stories, page 1; Data Drills, pages 13 and 17). The two largest public companies by market value a year ago—Allergan Inc. and Broadcom Corp.—were acquired by buyers outside the market in the past year. The No. 4 company on this year’s list—Ingram Micro Inc.—in February announced a deal to be bought.
The IPO market had been a springboard for several local companies to join the ranks of OC’s largest public companies during a three-year run that started as the Great Recession eased and ended with 2015’s slowdown.
Eight of the 50 largest public companies in OC by market value had their IPOs between 2012 and 2014, raising about $960 million on a cumulative basis.
Those offerings included a trio of homebuilders—TRI Pointe Group Inc., William Lyon Homes and New Home Co.—as well as Boot Barn Holdings Inc. (see related story, page 1), Opus Bank, Tilly’s Inc., El Pollo Loco Holdings Inc. and Habit Restaurants Inc.
OC’s pipeline of public companies could get a boost as soon as the current IPO logjam breaks up. A number of locally based private companies have the potential to go public, based on regulatory filings and other reports, although a time frame for those deals progressing is unclear as they wait for the market to improve.
Irvine-based Vizio Holdings Inc. announced plans last summer to raise about $172 million in a public stock offering, but the electronics maker has yet to move ahead with the IPO.
Aliso Viejo-based Five Point Holdings Inc., the master developer of Great Park Neighborhoods in Irvine and other large projects in California, said last July that it planned to go public but has yet to advance that plan.
Officials with Miami-based homebuilder Lennar Corp., which spun off of Five Point in 2009, told analysts late last month that the deal is still on—but the time frame remains in flux.
“Of course, the difficult market conditions of the first quarter have kept us on the sidelines,” said Stuart Miller, Lennar’s chief executive.
Emile Haddad, chief executive of Five Point, is the former chief investment officer of Lennar.
Other local private companies said to be considering IPOs include a pair of Aliso Viejo-based technology companies: UST Global Inc., an information technology services provider; and Telogis Inc., a logistics software maker.
Neither company had filed registration statements with the Securities and Exchange Commission for a potential IPO as of this month.
Sales, Other Avenues
Not every local company eyeing an IPO last year has decided to wait out the rocky market for new stock offerings.
Aliso Viejo-based medical device maker Ellipse Technologies Inc. announced plans in October to raise up to $75 million in an IPO; three months later it changed course and announced a sale to San Diego-based NuVasive Inc. in a deal worth up to $410 million.
Foothill Ranch-based mortgage lender LoanDepot Inc. called off plans for its IPO in November, days before it was expected to begin trading shares.
The IPO had valued the company at about $2.5 billion—which would have placed it at No. 10 on this week’s list.
The company cited choppy market conditions for the change in plans. It has yet to officially withdraw the proposed stock offering, according to regulatory filings.
LoanDepot was founded in 2010 by Anthony Hsieh, who has grown the company into one of the country’s biggest consumer-direct nonbank mortgage lenders.
Hsieh said in a blog entry shortly after the scuttled IPO that the company had backup plans for growth.
“LoanDepot has many options as a successful profit-generating company, and the pursuit of an IPO was one option to accelerate our plans for growth that were already in progress,” Hsieh said.
“Unlike other IPO candidates, we’re already moving forward with our plans because of our capital reserves and the investor confidence we’ve earned beyond the IPO market.
“While an IPO continues to be an option, perhaps one day in the future, it’s not a necessity,” he said.
