IPO Outlook Strong, but Focus Still on the Internet
The market for initial public offerings looks strong so far this year, especially for several upcoming deals by California-based companies, market specialists say.
California IPOs expected to be sold in the next few weeks include Studio City-based GenesisIntermedia.com Inc., a multimedia marketing company; Los Angeles-based Digital Lava Inc., a video publishing software firm; Sunnyvale-based NVidia Corp., a developer of graphics processors and related software; Burlingame-based Serena Software; Los Angeles-based Korn/Ferry International, an executive search firm; and Carlsbad-based Invitrogen Corp., a biotech firm.
“The market is in better shape as far as trying to get deals done, but the focus is still too narrow, with the Internet dominating the landscape,” said David Menlow, president of IPO Financial Network Corp., a New Jersey data tracker.
Indeed, coming on the heels of last year’s market for IPOs, which included some of the biggest deals in history, billions of dollars in IPO deals are expected in the first quarter. A large portion of those will be from tech-related firms, analysts said.
Last week’s blockbuster--and the year’s first IPO--was a deal by San Francisco-based MarketWatch.com Inc., which was priced at 2.75 million shares at $17 each Thursday, raising $46.8 million through lead underwriter BT Alex. Brown Inc.
The company, which operates a financial news Web site, opened for its first day of trading on Nasdaq at $90 a share, as more than 6 million shares changed hands in the first 45 minutes of trading. The stock closed at $97.50, after trading as high as $130 and as low as $69. More than 9.7 million shares changed hands.
MarketWatch.com. provides Internet-based, real-time news and is licensed to use the CBS name, logo and news content. It also benefits from a marketing agreement with CBS, which significantly boosted investor interest in the deal.
Other expected IPOs this week include an offering from GenesisIntermedia.com, with 100 employees, which plans to raise about $18 million by selling shares at $9 each through Millennium Financial Group. Formed in 1993 to produce TV infomercials, much of the company’s revenue comes from the “Men Are From Mars, Women Are From Venus” series by author John Gray.
“Because of the .com in this name, I’m looking for the Internet wave to take this one up too,” Menlow said. “As far as after-market sponsorship and when the smoke settles, it’s anyone’s guess. The stock may have difficulties retaining its prices.”
Another offering expected this week is that of Digital Lava, a small company that develops video publishing software products and provides related services. It is expected to raise about $18 million by offering units, each comprising two common shares and one warrant (or right to buy common shares). Although the IPO is expected to be successfully sold, some analysts question the long-term future of the stock, given the company’s small size.
“This deal will work because of confusion with the name. People are going to think that this is Internet-related because of ‘digital.’ ”
A more closely watched deal comes from NVidia, which is expected to raise $31.5 million through lead underwriter Morgan Stanley, Dean Witter & Co. The company, with a market value of $257 million, is expected to sell 3.5 million shares at $7 to $9 each. NVidia makes personal computer processors for three-dimensional graphics software.
“This one is very strong, though not Internet-related,” Menlow said, citing the company’s growing business and sponsorship.
Korn/Ferry is also likely to be watched closely. It was expected to be sold in the fall but was delayed because of poor market conditions. The company is expected to sell $187 million in securities in the next two months.
In early February, watch for Serena Software, a software change management firm expected to raise about $60 million in a deal led by Hambrecht & Quist Inc. “This one could see a 25% premium” in sale price, Menlow said.
Another Southern California IPO is that of Santa Ana-based Corinthian Colleges, a deal filed in late July but delayed in the fall because of the market turmoil. Earlier this month, Corinthian told the Securities and Exchange Commission that it had increased its IPO pricing range to $16 to $18.
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Debora Vrana covers investment banking. She can be reached via e-mail at debora.vrana@latimes.com.
