March offered up another goose egg for VC-backed IPOs, but April offered three reasons to hope that the frozen IPO market is finally thawing.
Changyou.com Ltd. (Nasdaq: CYOU) got things rolling on April 2 with the first Nasdaq IPO since November. After pricing 7.5 million American Depositary Shares at $16 each (its range was $14-$16), the online gaming company saw its stock price surge to $20.02 on its first day of trading. Investor interest stayed strong in the following days, sending the stock to $26.92 by April 17.
Heartened by the market’s reaction to Changyou, two private equity-backed companies went public on the New York Stock Exchange the week of April 13: Bridgepoint Education Inc. (NYSE: BPI) and Rosetta Stone Inc. (NYSE: RST).
Rosetta, which makes language learning software, posted the strongest performance of the two. It priced at $18 per share (above its range of $15 to $17) on April 16 and shot up to $25.12 by the end of the day.
ABS Capital Partners, Rosetta’s largest shareholder, sold 1.89 million shares in the IPO for proceeds of just over $34 million, according to a regulatory document. ABS continues to hold 5.67 million shares, which were worth $160.2 million as of April 17, when Rosetta’s shares closed at $28.25.
Rosetta’s second-largest shareholder, Norwest Equity Partners, sold 1.25 million shares in the IPO for proceeds of about $22.5 million. It continues to hold 3.7 million shares, which were worth $104.5 million on April 17.
Bridgepoint, which operates traditional and online universities, priced well below its expected range of $14 to $16. It went out at $10.50 on April 15 and closed at $11.10 at the end of the day.
Even with the lukewarm reception, Bridgepoint paid off big for its largest shareholder, Warburg Pincus, which held 89.3% of the shares prior to the IPO. Warburg sold just over 7 million shares in the IPO for proceeds of about $74 million. It still holds 36.6 million shares, which were worth close to $440 million on April 17, when Bridgepoint’s stock closed at $12.01.
VentureTek, which held a 2.5% stake prior to the offering, sold 592,715 shares in the IPO for $6.2 million and held close to 610,000 shares afterward that were valued at $7.3 million on April 17.
So, even though no venture-backed company has gone public for two straight quarters, there is at least some reason for the 26 VC-backed companies in registration to be hopeful. —Lawrence Aragon