In 2014, Triangle companies had another bang-up year going public – the second consecutive year a wave of local businesses raised big bucks as they morphed from privately held to publicly traded.
From an investment perspective, the stock performance of local companies that had an initial public offering of stock in 2014 also was similar to last year’s – that is, a mixed bag.
Six Triangle companies started selling shares to the public this year. That follows seven local companies that went public in 2013, believed to be the most ever.
To put the recent wave of IPOs in perspective, just a single Triangle company went public in each of the four years before 2013.
“Thirteen companies in two years just shows there is a strong, deep bench of companies here,” said Bob Creeden, executive director of Blackstone Entrepreneurs Network of North Carolina, which aims to help local entrepreneurs convert technology into fast-growing companies.
The local companies that had their first stock offerings this year collectively raised more than $700 million from investors before deducting fees and expenses. That total doesn’t include the extra money they raised when their underwriters exercised options to purchase additional shares at the IPO price.
The surge in Triangle IPOs is in step with the national trend. The 222 companies nationwide that raised $55 billion by going public in 2013 made it the most active year for IPOs since 2000 – and 2014 was even better, according to IPO adviser and research company Renaissance Capital.
This year, 273 companies went public nationwide, a 23 percent increase. The amount of money raised jumped even more – 55 percent – but that number was inflated by the IPO of Chinese e-commerce company Alibaba, whose $22 billion IPO was the largest ever.
The stock market’s robust performance has buoyed the IPO market.
“The macro point of view is that, when the capital markets perform as they have over the past several years, the investment bankers are eager to bring promising companies to the public markets,” said attorney Larry Robbins of Raleigh law firm Wyrick Robbins.
That said, Robbins firmly believes that the Triangle was – and continues to be – well-positioned to take full advantage of the vigorous IPO market.
“We have more promising emerging-growth companies here in the Triangle today than we’ve ever had,” Robbins said. That includes, he added, a fair share that are managed by serial entrepreneurs who have posted a successful track record.
At the same time, the investors that backed these newly pubic companies when they were privately owned – whether they were venture capital or private equity firms – have seized the opportunity to cash in on their investments thanks to the strong market.
“A lot of these companies have been growing for some time,” said Joan Siefert Rose, president of CED, a Triangle-based support group for entrepreneurs. “There has been a lot of patient money behind these companies.”
Rose also noted that the Jumpstart Our Business Startups Act, or JOBS Act, which President Barack Obama signed into law in 2012, made it more attractive for emerging growth companies to go public by reducing disclosure requirements and enabling them to “test the waters” before unveiling plans to go public.
Two of the Triangle companies that went public in 2014, INC Research and PRA Health Sciences, are contract research organizations, or CROs, that help pharmaceutical and biotechnology companies test experimental drugs and analyze the results. Last year Quintiles, a Durham company that ranks as the world’s largest CRO, also went public.
Those IPOs demonstrate “the strength of the contract research companies we have here in the Triangle,” Rose said. The Triangle has more CROs, and more CRO workers, than any place else.
INC and PRA also accounted for two of the three newly public Triangle companies whose shares surged ahead after going public. The third company whose stock jumped significantly post-IPO is Square 1 Bank, a bank based in Durham that caters to venture capital firms and the companies they invest in across the country.
Shares of INC and PRA, both of which went public last month, have risen 41 percent and 36 percent, respectively. Square 1 shares have risen 35 percent since it went public in March.
Of the other Triangle companies that went public in 2014, shares of drug-development company Argos Therapeutics rose 17 percent; shares of Scynexis, another drug-development company, have been flat since it went public.
The biggest disappointment, investment-wise, has been NephroGenex. Shares of the company, which went public at $12 in February, closed at $4.87 on Friday.
Nationwide, according to Renaissance, companies that went public this year have risen an average 16 percent since going public. That’s down from a much more robust 41 percent average return in 2013.
Hal Eddins, vice president and investment adviser at Capital Investment Cos. in Raleigh, said it’s much too early to pass judgment on the Triangle companies that went public in 2014.
“The true judge ... will be a year and two years and three years from now,” he said.
Meanwhile, Robbins, the attorney, is upbeat about the prospects for Triangle IPOs in the new year.
“I believe 2015 is going to be similar to 2013 and 2014, in terms of the number of local (IPOs), assuming we don’t have a market meltdown,” Robbins said.
Take note: Robbins was saying much the same thing about 2014 a year ago. And he was right.