2013 could end up being a banner year for initial public offerings of common stock by Triangle companies.
In each of the past four years, just a single local company has successfully raised money from investors via an IPO. But so far this year, one company already has gone public – Raleigh-based medical diagnostics company LipoScience – and three others have notified the Securities and Exchange Commission of their plans to go that route.
One of those three companies, Durham drug-development company Chimerix, is expected to price its shares after the market closes on Wednesday and begin trading on Thursday. It’s hoping to sell 6.1 million shares of stock at between $13 and $15 per share.
The others waiting in the wings are: Quintiles, the world’s largest pharmaceutical services company, which hopes to raise up to $600 million from investors; and Ply Gem Holdings, a maker of vinyl siding and other products for home exteriors, which has targeted selling up to $300 million worth of stock.
More could be on the way. Larry Robbins, a securities lawyer with Wyrick Robbins Yates & Ponton, said he knows of four other local companies that are contemplating filing to go public later this year.
“What happens at the macro-level will have an impact on that,” Robbins said. “They have to have a robust market.”
The flurry of Triangle IPO filings this year hasn’t been part of a broader surge.
Just 35 companies nationwide filed for an IPO in the first quarter, down from 50 a year earlier, according to Renaissance Capital. Similarly, the 31 companies that actually went public in the first quarter was in line with the past two quarters but down from 42 a year earlier – although the latest crop of companies did raise 28 percent more money from investors.
However, with the overall stock market hitting record highs, Renaissance Capital expects the IPO market to improve.
“Though the U.S. IPO market continued to trend sideways in the first quarter, we expect a pickup in activity through 2013,” the firm stated in its latest review of the market.
When a Triangle company goes public, it simultaneously provides the business with an infusion of cash and buttresses the region’s cachet as a thriving business hub.
IPOs also enable private investors to cash out on their investments. Up to now Chimerix has relied on funding from venture capital firms, as did LipoScience before going public. Meanwhile, Quintiles and Ply Gem are much larger companies that are backed by private equity firms. Last year, Quintiles posted $3.7 billion in revenue while Ply Gem’s revenue was $1.12 billion
James Verdonik, a securities lawyer with Ward and Smith, sees the current IPO activity as an anomaly driven by the specific needs and circumstances of the individual companies.
“I don’t see that as a major sign of ‘Wow, look at what is going on in the Triangle,’ ” Verdonik said. “It’s a positive sign, but I don’t think it means very much.”
To be sure, the Triangle companies that already have filed to go public could see their plans go awry.
Indeed, Cary-based Ply Gem first filed plans to go public in June 2010 but never followed through, presumably because the market wasn’t receptive. On Friday, however, it filed new documents that indicated it was reviving its efforts. Likewise, LipoScience first stepped forward with its IPO plans in June 2011 but didn’t go public until the end of January when it sold 5 million shares at $9 apiece.
“We had our local companies waiting on the sidelines, waiting for the right time,” Robbins said.
In recent years, at least three other Triangle companies have filed plans to go public and withdrawn them because of weak demand from investors: Durham drug-development companies Aldagen and Argos Therapeutics, and online publishing company Lulu, which filed for an IPO in Canada.
Last year, Aldagen was sold by a small, publicly traded Maryland company in a deal valued at more than $40 million. Officials at Lulu and Argos said Monday that they have no plans to go public this year.
Ben Brooks, a partner with Raleigh venture capital firm Southern Capitol Investors, said it’s no coincidence that no Triangle information technology companies have filed to go public so far this year.
Brooks said that drug-development companies that have life-saving drugs in the works can get by on their potential, but Wall Street typically expects IT companies to have $100 million in revenue in order to go public.
“I know (IT) companies that wish they could go public, but I don’t know of any that could get out of the box,” Brooks said.