By Kerry A. Dolan, Forbes.com
Special to ABCNEWS.com
March 3, 2004
The IPO window is open, and technology companies are lining up to go public while they can. The biggest concern: How long will the opportunity last? With the recent selloff in tech stocks, no one knows for sure.
Twenty-five companies went public through Feb. 25 this year, raising $5.86 billion, compared with just three companies that raised $298 million in the same period a year ago, according to Thomson Financial.
Of the 25, 11 were technology, medical or biotech companies. This year has seen the most initial public offering activity since 2000, when 66 companies raised $9.4 billion during the same period, says Thomson. Of course, that was before the Nasdaq began its long fall and the dot-com bubble burst.
“Biotech and medical IPOs are roaring,” says Richard Peterson, chief market strategist at Thomson Financial. The six biotech/medical deals priced this year gained an average 28 percent on their first day of trading. That compares with first-day gains of less than 10 percent for all other IPOs this year, noted Peterson.
Among the best performing of these — with a 47 percent return since its IPO on Jan. 30 — is Eyetech Pharmaceuticals, according to IPOhome.com, the Web site of IPO research firm Renaissance Capital. Eyetech, a New York-based company, is developing in conjunction with Pfizer a drug to prevent vision loss caused by macular degeneration.
Other health care companies showing returns above 20 percent so far: Symbion, which operates surgical centers, and Kinetic Concepts, which makes systems to treat difficult-to-heal wounds.
Success Breeds More Offerings
Such positive performance has spurred others to follow suit.
Since Jan. 1, 32 companies have filed for initial public offerings — 23 of them since the beginning of February, according to ipohome.com.
Yet another factor driving the boomlet in IPOs is the $12 billion in new money that poured into mutual funds in January, noted Peter Kuo, senior vice president for investment banking at W.R. Hambrecht in San Francisco, speaking at a recent meeting of the Asia America MultiTechnology Association (AAMA), a Silicon Valley Asian-American technology group, in Palo Alto, Calif. “That [money] had to be put to work right away,” added Kuo.
Kuo says positive performance by tech companies like Atheros Communications, a chipset maker for wireless networking equipment that went public Feb. 12, is a good sign for other semiconductor companies planning to go public. The biggest is Chinese firm Semiconductor Manufacturing International Corp., also known as SMIC. It plans to raise between $1.3 billion and $1.5 billion and is expected to go public the week of March 8.
Other Chinese technology firms are slated to go public in the U.S. as well — following, in part, on the success of earlier Chinese offerings. In December, Chinese travel service company Ctrip.com International — which has just $12 million in revenue — raised $75 million and is up 57 percent since its IPO, according to ipohome.com.
Linktone Ltd., which provides ring tones and horoscopes to mobile-phone users in China, is expected to go public the week of March 1. TOM Online, a Chinese Internet company selling enterprise software and wireless services, is likely to go public the week of March 8.
But there’s some uncertainty about how long this flurry of IPO activity will last. “The feeling in the market is a significant degree of guarded optimism,” said Kuo. “My concern is that the valuations are maybe not grounded in solid economic data. Plus, companies are still having difficulty with visibility of revenues in the second half of this year, and the valuations are based on 2005 numbers.”
Joseph Leung, head of international strategies at Fuller & Thaler Asset Management, also speaking at the AAMA meeting in Palo Alto, put it this way: “People got very greedy after last year’s stock market performance. We shouldn’t be as greedy this year.”