Just when the venture-backed IPO market is showing signs of life, we are confronted by a “crisis of confidence” on Wall Street. Investors, already shaken by the Enron debacle, are pondering the implications of alleged insider trading by squeaky-clean Martha Stewart and the revelation that WorldCom may have perpetuated the largest case of accounting fraud in U.S. history.
Those events have thrown a scare into the market and could put the breaks on the mini-rebound in VC-backed IPOs in the second quarter. Twelve domestic venture-backed companies raised $1.3 billion in initial public offerings in Q2, up from four new issues that raised $376 million in Q1, according to data being released today by Thomson Venture Economics and the National Venture Capital Association. It was the second-best showing in the past six quarters, just behind the 14 new issues that raised $1.4 billion in the fourth quarter of last year.
A total of 32 companies (including non-venture backed enterprises) made it out in the second quarter, raising $5.8 billion.
For the first half of the year, a total of 49 companies went public, raising $15 billion. Venture-backed companies made up 32% of the number of new issues in the first six months and 11% of the total dollar amount raised.
The biggest winners were health care issues (five in all), whether it was a company that provides temporary medical staffing or cancer detection systems. The next largest segment was enterprise software, followed by IT services for corporations and the government.
Despite the downturn in the market, the value of venture-backed IPOs increased during the quarter. The average closing price increased 11% from $15.31 on the date of the IPO to $17.03 on June 27. That’s substantially better than the 6% increase in share price in all IPOs completed in the second quarter.
The quarter’s largest new issue came from Veridian Corp., an IT services provider for U.S. defense agencies. It offered 13.5 million shares for $216 million on June 4. Veridian’s venture backers include Monitor Clipper Equity Partners based in Arlington and the Texas Growth Fund.
It should come as no surprise that the company with the largest post-offering valuation was JetBlue Corp., the discount East Coast airline that went public in April. Its venture backers include Weston Presidio, J.P. Morgan New Air Investors (managed by JP Morgan Partners) and BancBoston Ventures.
Its market capitalization of $1.1 billion was double that of all other offerings except those of CTI Molecular Imaging, Eon Labs Inc. and Medical Staffing Network Inc.
Contact Lawrence Aragon
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