If you’re thinking about forcing an IPO, first consider what happened to Orbcomm (Nasdaq: ORBC).
Orbcomm operates a satellite system that tracks mobile and fixed assets, such as trains and gas meters. Sounds like a decent business. The problem is it is still too early too tell. Orbcomm has minimal revenue (just $15 million in 2005) and is operating in the red.
To get the deal done, the underwriters had to lower Orbcomm’s offering price to $11 from a planned $14 to $16 and cut the number of shares from 11.1 million to 9.2 million. But even that wasn’t enough. Orbcomm’s stock plummeted 30% to $7.49 on its first day of trading. The last time an IPO had such a poor opening day was 2000, when PeoplePC went public, according to Thomson Financial (publisher of VCJ).
Why did Orbcomm roll the dice? Could it have been that its VC backers were anxious for an exit? After all, they had pumped $103 million into the company, including $72.5 million in December 2005. Whatever the reason, the company’s backers are probably wishing they could ask for a Mulligan.
Most VC-backed companies are approaching Wall Street with caution. Six venture-backed companies went public in November, raising $475 million. That contrasts with eight venture-backed IPOs that raised just over $1 billion in November 2005. —Lawrence Aragon