It’s still too early to say the IPO market is “back,” but the numbers are looking better each month. Venture-backed companies have already raised more through public offerings in 2010 than they did in the IPO draught years of 2008 and 2009. And with several more high-profile offerings on tap—including Skype and heavily venture-backed biotech Pacific Biosciences—investors can expect more big debuts.
At least a dozen venture-backed companies went public on U.S. exchanges between July and mid-August, according to Thomson Reuters (publisher of VCJ). Several did quite well, including GreenDot (NYSE: GDOT), a prepaid debit card provider, Qlik Technologies (Nasdaq: QLIK), a developer of software for analyzing business data, and AutoNavi (Nasdaq: AMAP), a China-based provider of digital mapping services. (See IPO Profiles, starting on the previous page.)
Yet the uptick in offerings did little to alleviate the backlog of companies in registration, as a large crop of new IPO hopefuls filed to go public in July and August. Market-watchers attributed the rise to a combination of optimism and also acceptance of the notion that, while present market conditions may not be buoyant, they’re at least good enough to carry out an offering.
“Strong companies will still find a market,” says Jim Anderson, head of corporate finance sales at SVB Financial Group. “But valuations are still lower than what many people were expecting.”
Several of the companies that did make it out in the last couple of months—particularly in the biotech and pharmaceutical sectors—did so only after cutting proposed share prices. For example, NuPathe (Nasdaq: PATH), a Conshohocken, Penn.-based developer of treatments for diseases of the central nervous system, priced its 5 million share offering at $10 a share in early August, well below the proposed $14 to $16 range. And Trius Therapeutics (Nasdaq: TSRX), priced its 10 million share offering at $5 a share The San Diego-based drug developer previously filed to sell at least 6 million shares for $12 to $14 each.
Others, however, saw sizeable gains in early trading. Radnor, Penn.-based Qlik Technologies priced its mid-July offering at $10 per share—above its proposed $8.50 to $9.50 offering range—raising $112 million. Shares soared as high as $16 in aftermarket trading before settling around $14 in late August. Shareholders include Accel Partners (26.7% pre-IPO stake), Jerusalem Venture Partners (25.4%) and Stiftelsen Industrifonden (10.1%).
Green Dot was also trading higher, with shares up more than 20% from their initial offer price, after the Monrovia, Calif.-based company reported sharply higher year-over-year revenue and profit in its most recent quarter. Venture shareholders include Sequoia Capital (with a 31.9% pre-IPO stake) and Total Technology Partners (10.8%).
Although venture investors are seeing what appear to be some promising IPO exits, public offering activity remains unusually sluggish. So far this year, an average of five VC-backed companies have gone public each month, raising an average monthly total of $429 million, according to VCJ’s analysis of data from Thomson Reuters data. In 2007, by comparison, an average of seven VC-backed companies went public each month and collectively brought in $861 million, VCJ’s analysis shows.
This year’s total could see an end-of-year boost, if recent filings are any indication. Internet calling service Skype, in particular, could liven things up if it pulls off its proposed $100 million offering. The filing comes less than nine months after an investor group that includes buyout shop Silver Lake and venture firm Andreessen Horowitz purchased a majority stake in the company from eBay.
Several other companies filed to go public between mid-July and mid-August:
• Pacific Biosciences, a Menlo Park, Calif.-based DNA gene sequencing company, filed for a $200 million IPO. The company has raised over $460 million in VC funding from a long list of backers, including Mohr Davidow Ventures (12.02% pre-IPO stake), Kleiner Perkins Caufield and Byers (9.66%), Maverick Capital (9.13%), Gen-Probe Inc. (8.57%), Alloy Ventures (6.89%), Blackstone Cleantech Venture Partners (6.3%) and Deerfield Management (5.29%).
• NetSpend, an Austin, Texas-based provider of prepaid reloadable debit card, is looking to raise $200 million in its IPO. NetSpend was acquired in 2004 by Oak Investment Partners (46.9% pre-IPO stake) and JLL Partners (32.5%), based on NetSpend’s 2008 acquisition of JLL portfolio company Skylight Financial.
• Aegerion Pharmaceuticals, a Bridgewater, N.J.-based developer of small molecule drugs for cardiovascular and metabolic diseases, is looking to raise $86 million. The company raised $45 million over the past five years from backers including Advent International, Alta Partners, Index Ventures, MVM Life Science Partners and Scheer & Co.
• Gevo, an Englewood, Colo.-based developer of advanced biofuels, filed for a $150 million IPO. Gevo has raised over $40 million from Khosla Ventures (40.6% pre-IPO stake), Virgin Green Fund (15.2%), Total Energy Ventures (12.7%), Burrill & Co. (10.3%) and Malaysian Life Sciences Capital Fund (9.1%).
• Demand Media, a Santa Monica, Calif.-based provider of distributed social media, filed for a $125 million IPO. The company has raised nearly $400 million in VC funding from Goldman Sachs, Generation Capital Partners, Oak Investment Partners, Spectrum Equity Investors and 3i Group (whose shares are now held by W Capital Partners).
• SiGe Semiconductor, an Ottawa-based supplier of integrated circuits for wireless systems, filed for a $143.75 million IPO. Current shareholders include Prism VentureWorks (19.8% pre-IPO stake), VenGrowth(15.5%) and W Capital Partners (11.2%).
• Epocrates, a San Mateo, Calif.-based provider of clinical information and support tools to health care professionals, filed for a $75 million IPO. The company has raised over $86 million in VC funding from firms including Bay City Capital, Draper Fisher Jurvetson, Goldman Sachs, InterWest Partners, The Sprout Group and Three Arch Partners.
• And Endocyte, a West Lafayette, Ind.-based developer of therapeutics for cancer and autoimmune diseases, filed for an $86.25 million IPO. The company has raised around $61 million in VC funding since 2001 from backers including American Bailey Ventures, Blue Chip Venture Co., Burrill & Co., Clarian Health Ventures, Sanderling Ventures and Triathlon Medical Ventures.