Venture-backed computer hardware and software (CHS) IPOs staggered through the final quarter of this year, as only four such companies went public, according to the VentureExpert database. The last time the sector produced so few venture backed IPOs was during the third quarter of 1998. In the third quarter, the once dominant sector spawned 19 venture backed IPOs, or 38.78% of all venture backed IPOs for that quarter.
Because of the precipitous drop in IPOs during the fourth quarter, the sector posted only 50 venture backed IPOs for the year, two less than in 1999. Before the fourth quarter, the sector seemed on pace to eclipse the number of IPOs it had achieved last year, posting 46 IPOs through the first three quarters of this year compared to only 38 through the first three quarters in 1999.
Venture-backed IPOs from the sector managed to muster up a total offer amount for the year of $3.7 billion, or 19.1% more than last year’s total offer amount of $3.1 billion. The size of the IPOs increased as well, with an average offer amount of $74.712 million, or 24.87% more than last year’s average of $60.315 million.
However, the average offer amount in the fourth quarter, $$62.8 million, was the smallest average since the third quarter of 1999, when 18 CHS venture backed IPOs accounted for an average offering amount of $55.978 million.
All in all, the fourth quarter numbers portray a waning sector, one that has lost as much investor interest as any other technology sector. Although the four fourth quarter IPOs made up 23.53% of all venture backed IPOs in the quarter, they accounted for only 13.38%, or $251.2 million, of the total $1.8 billion offered. For the three quarters before that, IPOs from the sector made up 23.23% of all venture backed IPOs, but accounted for 18.78%, or $3.4 billion, of a total offering amount of $18.5 billion. Proportionally, the fourth quarter total offering amount was also far smaller than for any of the four quarters of 1999, when CHS venture backed IPOs accounted for 15.90%, or $3.1 billion, of the total $19.7 billion offered.
At midday on Dec. 21, the fourth quarter venture-backed IPOs were having mixed fortunes. Array Biopharma Inc. (NNM:ARRY) and Synplicity Inc. (NNM:SYNP) were trading at $8.00 and $10.75, respectively, up 6.67% and 34.38% from their offering prices of $7.50 and $8.00. Array’s IPO was lead managed by Lehman Brothers, and the company’s later stage investors included ARCH Venture Partners, Advent International Corp., Mosaix Ventures and Vector Fund Management. Lead-managed by Robertson Stephens, Synplicity counted Norwest Venture Partners and several undisclosed sources among its later stage investors.
On the losing side were Docent Software Inc. (NNM:DCNT) and InforMax (NNM:INMX), which were lead managed by Deutsche Banc Alex Brown and Bear Stearns, respectively. Docent was trading at $6.50, down 40.91% from its $11 offer price, while InforMax was trading at $9, 43.75% down from its offer price of $16. Docent’s late stage investors included Advanced Technology Ventures, Gilde Investments, Invesco, and Norwest, while InforMax was financed by FBR Technology Ventures and undisclosed investors.
The recent woes could be just the beginning of a longer stretch of tough times for the sector, as analysts forecast slumping computer sales, meaning less demand for hardware and software products.
Omar Sacirbey can be contact at