June IPOs Were Not so Hot, but Summer Is Still Young
The space shuttle, Barbie and the Internet--all were once just the dreams of another crazy Californian. What helps transform these sorts of visions into reality?
Money. Lots of it.
Each week, we will take a look at the initial public offerings, or IPOs, the stock deals sold to private investors and the bond sales by California-based companies large and small. We will analyze the performance of recent deals, preview financings and look behind the scenes at the investment bankers and lawyers who put the deals together.
These are the companies that could become the next century’s Arco, Bank of America or Hughes Aircraft. Or they could be the next disaster for overeager, unsophisticated investors. You’ll see the trends taking shape here first.
Although June was the worst month so far this year for IPOs, 1998 has been a strong year for these first-time stock sales, with more than 40 California-based companies raising about $1.5 billion through midyear, according to IPO Monitor, a Calabasas-based data firm. That puts 1998 on track with last year, when about $1.6 billion had been raised by this time, but still short of 1996’s record pace.
So far, July promises to be active. On the smaller end of the spectrum, Los Angeles-based Team Communication Group, a firm that develops television shows for PBS and the Family and Discovery channels, is expected to raise $10.5 million in an IPO led by National Securities of Chicago. The company is developing a show based on the movie “Total Recall” and just completed 22 half-hour episodes of “Amazing Tails,” featuring extraordinary pets (such as rabbits that surf).
Golden State Vintners, a Greenbrae supplier of bulk wine to wineries such as Sutter Home, is expected to raise $75.3 million through Goldman Sachs, the leading underwriter of California IPOs so far this year, with 21% of the new-issue market.
As with most IPOs, especially the hot tech offerings, the average investors will have a tough time buying stock on the first day of trading, as most of the shares will be gobbled up by institutions. Later weeks might provide more opportunity as the buzz settles.
The short July 4 holiday week was lackluster. Abgenix Inc., a Fremont-based pharmaceutical company that develops products to fight transplant-related diseases and cancer, was priced Friday at $8 a share, lower than expected, and raised $20 million through BancAmerica Robertson Stephens. The stock rose just 12.5 cents on its first trading day.
That sluggishness extended even to California’s ever-popular technology sector. MIPS Technology, a Mountain View-based chip design company, raised about $16.3 million after underwriting fees in an IPO through Deutsche Morgan Grenfell with stock priced at $14 a share. MIPS, a spinoff of Silicon Graphics, saw its stock fall slightly the first day to close at $13.44 a share.
“MIPS was an unqualified failure and reinforced the shiver the IPO market has been going through for the month of June,” said David Menlow, president of IPO Financial Network Corp., a data firm in Springfield, N.J. “It’s going to be sloppy this month.”
In the last weeks of June, several California deals were priced below expectations, offering sizes were slashed and some, like Hines Horticulture, were pulled for a week until the market improved. Hines, the Irvine supplier of plants to major chains such as Home Depot, eventually sold $56.1 million in stock on June 23, but it was priced at $11 a share--about 20% less than the bottom of its expected price range. Its price failed to rise in the first day of trading.
A San Francisco-based company, Aurora Foods, maker of such well-known brands as Duncan Hines cake mixes and Log Cabin and Mrs. Butterworth syrups, raised $259 million in an IPO through Goldman Sachs on June 25. Its stock price also failed to rise on the first day of trading.
More successful June deals by California companies included Restoration Hardware, the upscale furniture store started by Stephen Gordon in Eureka in 1980, which raised $52.8 million through (who else?) Goldman Sachs. Restoration’s stock price jumped 43%, from $19 a share to $26.25, on its first trading day. As with most hot IPOs, few individual shoppers got a piece. In fact, about 80% of the stock was gobbled up by major mutual funds, and a few heavyweight (i.e., multimillionaire) investors took the rest, according to Tom Taulli, analyst with IPO Monitor.
June saw several high-tech deals become smash hits. One of those, another IPO led by Goldman Sachs, was San Mateo-based Inktomi Corp., which develops software for large computer networks. It’s been the second-hottest California IPO this year, behind Broadcom Corp. Inktomi stock doubled in its first day to close at $36 a share. San Jose-based Software.net Corp., which sells computer programs and packaged software over the Internet, saw its stock rise 47.2% when it went public June 17 through underwriter Deutsche Morgan Grenfell.
Offerings from some other industries also did well. Bebe Stores, a Brisbane marketer of upscale women’s clothes, rose 19.9% on June 17, when it sold a $13.8-million IPO through BancAmerica Robertson Stephens. Balance Bar, a Carpinteria-based maker of nutritional snack bars, saw stock from its $10.5-million IPO rise 17.3% on June 2, its first day of trading.
What will be California’s summer blockbusters? Look again to the Internet craze.
Insiders are betting on two Southland deals. GeoCities runs advertising-supported Internet “communities.” The Santa Monica-based company recently filed plans to raise $72.5 million through lead manager Goldman Sachs after agreeing to settle federal charges about the way it collects and uses personal information on children. And CitySearch, a Pasadena-based company that runs city guides on the World Wide Web, just filed to sell a $50-million IPO through NationsBanc Montgomery.
Who laughed when they called this the Tech Coast?
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Tracking the Deals
IPO INDEXES
The following indexes from IPO Monitor track weekly conditions in the market for initial public offerings by measuring the the recent performance of 30 IPOs nationwide and 10 IPOs by California-based companies. Ascore of 30.9, for example, indicates that shares have risen by a mean of 30.9% from the IPO price. This week’s ‘exceptional rating’ for California is influenced by red-hot tech tirm Inktomi, up more that 100% since its June IPO.
Last week’s IPO conditions
National: Healthy
California: Exceptional
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U.S.: 9.3
CALIF.: 30.9
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Rating system:
Less than 7: Poor
8-15: Healthy
16-20: Strong
21-25: Outstanding
26 or more: Exceptional
Data provided by IPO Monitor
WHO’S RAISING MONEY AND HOW
UPCOMING DEALS:
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COMPANY: Golden State Vintners
TICKER SYMBOL: VINT
CITY: Greenbrae
INDUSTRY: Winery
SIZE, IN MILLIONS: 40.9
OFFERING: IPO
ESTIMATED PRICE: $16-$19
UNDERWRITER: Goldman Sachs
DATE: 6/21
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COMPANY: Team Communications
TICKER SYMBOL: TMCG
CITY: Los Angeles
INDUSTRY: Media
SIZE, IN MILLIONS: $10.5
OFFERING: IPO
ESTIMATED PRICE: $5.50-$7
UNDERWRITER: National Securities
DATE: 7/6
Recent IPOs
COMPANY: Aurora Foods
TICKER SYMBOL: TK
CITY: San Fran.
INDUSTRY: Food
SIZE, IN MILLIONS: $297.8
OFFERING PRICE: IPO
PRICE ON 7-2: $20-$23
UNDERWRITER: Goldman Sachs
DATE: 6/21
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COMPANY: MIPS Technologies
TICKER SYMBOL: MIPS
CITY: Mountain View
INDUSTRY: Tech
SIZE, IN MILLIONS: $17.5
OFFERING PRICE: $14.00
PRICE ON 7-2: $12.75
UNDERWRITER: Deutsche Morgan
DATE: 6/30
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COMPANY: Transnatl. Financial
TICKER SYMBOL: TFN
CITY: San Francisco
INDUSTRY: Financial
SIZE, IN MILLIONS: $7.3
OFFERING PRICE: $7.25
PRICE ON 7-2: $7.38
UNDERWRITER: Tejas Securities
DATE: 6/25
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COMPANY: Abgenix
TICKER SYMBOL: ABGX
CITY: Fremont
INDUSTRY: Biopham.
SIZE, IN MILLIONS: $20.0
OFFERING PRICE PRICE: $8.00
PRICE ON 7-2: $8.13
UNDERWRITER: BancAmerica R.S.
DATE: 7/2
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COMPANY: Collateral Therapeutics
TICKER SYMBOL: CLTX
CITY: San Diego
INDUSTRY: Biotech
SIZE, IN MILLIONS: 43.3
OFFERING PRICE: IPO
PRICE ON 7-2: $11-$13
UNDERWRITER: Bear Stearns
DATE: 6/21
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COMPANY: Hines Horticulture
TICKER SYMBOL: HORT
CITY: Irvine
INDUSTRY: Nursery
SIZE, IN MILLIONS: 80.0
OFFERING PRICE: IPO
PRICE ON 7-2: $11
UNDERWRITER: Lehman Bros
DATE: 6/24
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COMPANY: Restoration Hardware
TICKER SYMBOL: RSTO
CITY: Eureka
INDUSTRY: Retail
SIZE, IN MILLIONS: 52.8
OFFERING PRICE: IPO
PRICE ON 7-2: $19
UNDERWRITER: Goldman Sachs
DATE: 6/19
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COMPANY: Interplay Entertainment
TICKER SYMBOL: IPLY
CITY: Irvine
INDUSTRY: Tech
SIZE, IN MILLIONS: 27.5
OFFERING PRICE: IPO
PRICE ON 7-2: TK
UNDERWRITER: Piper Jaffray
DATE: 6/19
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COMPANY: Sofware.net Corp
TICKER SYMBOL: SWNT
CITY: Irvine
INDUSTRY: Tech
SIZE, IN MILLIONS: 45.0
OFFERING PRICE: IPO
PRICE ON 7-2: 9
UNDERWRITER: Deutsche Morgan
DATE: 6/17
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COMPANY: Bebe Stores
TICKER SYMBOL: BEBE
CITY: Brisbane
INDUSTRY: Retail
SIZE, IN MILLIONS: 13.8
OFFERING PRICE: IPO
PRICE ON 7-2: 11
UNDERWRITER: BancAmerica
DATE: 6/17
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COMPANY: Showpower Inc
TICKER SYMBOL: TK
CITY: Rancho
INDUSTRY: Dom Power
SIZE, IN MILLIONS: 13.2
OFFERING PRICE: IPO
PRICE ON 7-2: 11
UNDERWRITER: TK
DATE: 6/15
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COMPANY: NetGravity
TICKER SYMBOL: TK
CITY: San Mateo
INDUSTRY: Tech
SIZE, IN MILLIONS: 27.0
OFFERING PRICE: IPO
PRICE ON 7-2: 9
UNDERWRITER: BancAmerica
DATE: 6/12
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COMPANY: Inktomi Corp.
TICKER SYMBOL: INKT
CITY: San Mateo
INDUSTRY: Tech
SIZE, IN MILLIONS: 36.0
OFFERING PRICE: IPO
PRICE ON 7-2: 18
UNDERWRITER: Goldman Sachs
DATE: 6/10
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COMPANY: Balance Bar
TICKER SYMBOL: BBAR
CITY: Carpenteria
INDUSTRY: Retail
SIZE, IN MILLIONS: 10.5
OFFERING PRICE: IPO
PRICE ON 7-2: 10.50
UNDERWRITER: Hambrecht
DATE: 6/2
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OTHER DEALS
COMPANY: International Lease
TICKER SYMBOL: TK
CITY: Los Angeles
INDUSTRY: Lease
SIZE, IN MILLIONS: 125.0
OFFERING: Secondary
ESTIMATED PRICE: 99
UNDERWRITER: Lehman
DATE: 6/16
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COMPANY: Earthlink Network
TICKER SYMBOL: TK
CITY: Pasadena
INDUSTRY: Tech
SIZE, IN MILLIONS: 144.0
OFFERING: Secondary
ESTIMATED PRICE: 60
UNDERWRITER: Duetsche Morgan
DATE: 6/17
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COMPANY: InterVU
TICKER SYMBOL: TK
CITY: San Diego
INDUSTRY: Tech
SIZE, IN MILLIONS: 17.2
OFFERING: Secondary
ESTIMATED PRICE: 13
UNDERWRITER: Joesphthal
DATE: 6/18
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COMPANY: PacificAmerica
TICKER SYMBOL: TK
CITY: Woodland Hills
INDUSTRY: Mort
SIZE, IN MILLIONS: 63.0
OFFERING: Notes
ESTIMATED PRICE: market
UNDERWRITER: Merrill
DATE: 6/19
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Source: IPO Monitor, Securities Data Inc., IPO Financial Network
Deal Spotlight
Golden State Vintners, the Greenbrae-based maker of bulk wine for major wineries such as Sutter Home and a supplier of private-label wine for Trader Joe’s, plans an IPO today. “This is a name that is recognized in the industry, one of the largest bulk wine processors. It has all the right trimmings,” said David Menlow, president of IPO Financial Network Corp. “They’ve also got the best underwriter in the business, in our opinion.
TICKER: VINT
UNDERWRITER: Goldman Sachs
RANGE: $16-$19
AMOUNT TO BE RAISED: $75.3 million
Editor’s Note
In an effort to spotlight California’s next Walt Disney Co. or Yahoo Inc., each Monday The Times will feature California Dealin’, a new column tracking the growing companies based here that are raising big bucks from America’s investors.
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Debora Vrana covers investment banking for The Times. She can be reached at [email protected].
