New Issues Continue to Squeak Out

As the first half of 2010 winds to a close, it’s clear the IPO market is in stronger shape than it was a year ago.

Between January and late June, 22 venture-backed companies managed to go public, raising $1.8 billion, according to Thomson Reuters (publisher of VCJ). That is a considerable improvement over the same period a year ago, when just five VC-backed IPOs raised a combined $721 million.

Yet while conditions have improved, the IPO market remains unusually sluggish. The pace of new offerings exhibited only a modest pickup in late spring, commonly a busy period, with just five U.S. venture-backed companies making their debuts between May and late June. Most made it out only after cutting proposed share prices.

It’s not just a U.S. phenomenon. “Recent volatility in the global equity market has put pressure on IPOs, forcing many deals to price below their ranges, sell less shares or postpone or withdraw their plans to go public altogether,” according to a report from investment bank Renaissance Capital. The firm, nonetheless, predicts that “higher levels of IPO activity are likely in the second half of 2010,” given the strong pipeline of pending U.S. offerings, which includes such high profile companies as Tesla Motors and Zipcar.

Recent IPOs have generally received a tepid reception from Wall Street.

Motricity (Nasdaq: MOTR), a mobile data services provider, saw its shares fall 7.4% in first-day trading on June 18. A day earlier, the Bellevue, Wash.-based company priced its 5 million-share offering at $10 per share, well below the proposed $14 to $16 range. Motricity’s largest shareholders include Advanced Equities (27%), Carl Icahn (17%), Technology Crossover Ventures (11.6%), and New Enterprise Associates (10%).

BroadSoft (Nasdaq: BSFT), a provider of IP-based telecom applications, also saw its shares dip in initial trading last month. The Gaithersburg, Md.-based company sold 7.5 million shares for $9 each on June 16, the bottom of its expected price range of $9 to $11. The stock closed around $8 per share in initial trading. The largest venture shareholders in the company include Bessemer Venture Partners (23% stake), Grotech Partners (12%), Charles River Ventures (12%), Columbia Capital (9%), RRE Ventures (7%), Meritech Capital (6%) and Industry Ventures (6%). BroadSoft previously raised $67.5 million in venture funding between 1999 and 2009.

May’s four VC-backed IPOs fared better, with three of the four trading higher than their IPO prices at the end of the month. (For details, see IPO Profiles on previous pages.)

Accretive Health (NYSE: AH), a Chicago-based hospital services provider, sold 10 million shares at $12 each on May 20, after cutting the size of its offering its proposed share price. The stock jumped 13% in first-day trading, with shares trading above $14 in late June. Accretive’s largest venture backer is Ascension Health Ventures, with an 8.4% stake.

ReachLocal (Nasdaq: RLOC), a provider of online marketing services for small to mid-sized businesses, also cut its offering price, then saw shares rise in initial trading. The Woodland Hills, Calif.-based company sold 4.2 million shares for $13 each, below its proposed range of $17 to $19. The stock climbed 15% in first-day trading on May 20 and closed at $14.68 at the end of the month. ReachLocal’s largest venture backers include VantagePoint Venture Partners (53%), Rho Ventures (13%), and Galleon Group (6.7%).

TeleNav (Nasdaq: TNAV) made it to market with a relatively well-received offering on May 13. Its shares rose 22.5% in first-day trading after the company priced them at $8 each, below an already lowered range of $9 to $10 per share. The Sunnyvale, Calif.-based company, which offers location-based services via a mobile device, previously raised $35 million from Menlo Ventures (12.8% stake), iGlobe Partners (7.7%) and Sycamore Ventures (2.2%).

JinkoSolar (NYSE: JKS), a Chinese solar cell panel maker, was the one VC-backed offering in May that saw its shares decline by the end of the month. It priced its American Depository Shares at $11 each on May 14, but they closed at $10.45 on May 28. Its largest VC shareholders are Shenzhen Capital Group(6.7% stake) and Hupomone Capital Partners(4.7%).

Despite lackluster demand from public market investors in recent weeks, venture-backed companies continued to add their names to the IPO waiting list. Close to 40 companies were on the list last month. New additions include:

• AutoNavi Holdings. The China-based provider of digital mapping data is looking to raise $100 million. It raised $30 million in 2006 from Kleiner Perkins Caufield & Byers, Sequoia Capital and Walden International.

• ReSearch Pharmaceutical Services Inc. The Fort Washington, Penn.-based provider of clinical development services to the biopharmaceutical industry filed for a $100 million IPO. The company reports around $224 million in 2009 revenue, up from $175 million in 2008. Its shareholders include Cartesian Capital, The Argentum Group and First Analysis.

• TripWire. The Portland, Ore.-based provider of IT security and compliance automation software solutions filed for an $86.25 million IPO. TripWire has raised over $110 million in VC funding. Current shareholders include Advanced Technology Ventures (22.4% pre-IPO stake), Bessemer Venture Partners (10.1%), International Venture Partners (8.7%) and Industry Ventures (5.7%).

• And Zipcar. The Cambridge, Mass.-based provider of short-term car rental services filed for a $75 million IPO. It previously raised $31 million from backers including Benchmark Capital, Boston Community Capital and Greylock Partners.

While others were lining up at the IPO trough, one heavily-funded venture-backed solar company, Solyndra, opted instead to withdraw in June, citing adverse market conditions. The startup had planned to raise up to $300 million in a public offering, but the plan came under threat when the Fremont, Calif.-based company’s auditor questioned the financial viability of the company, according to Reuters.