The IPO market showed signs of life last week, capping the busiest week for new offerings since April 2008.
Last week, three companies made their debuts, including VC-backed
Medidata’s stock closed at $17 a share after the first full day of trading on Thursday, a more than $21% gain.
Eric Guja, an analyst at
“The last six or seven deals that were priced have traded relatively well in the first few days, and continued to trade well,” Guja said.
The Medidata IPO followed the U.S. market debuts last week of two Chinese companies: water treatment equipment supplier Duoyuan Global Water Inc., which closed its first day of trading up 36.7%, and specialty chemicals maker Chemspec International Ltd., which saw its shares rise as much as 13.3% before closing on the day unchanged.
Medidata, whose clients include Johnson & Johnson, is the third software company to go public in the United States this year, following language training software maker Rosetta Stone Inc. (NYSE: RST) and network software provider SolarWinds Inc. (NYSE: SWI).
Arlington, Va.-based Rosetta Stone, which was acquired in a 2006 management buyout by
SolarWinds raised $151.5 million in its IPO in late May. The Austin, Texas-based company had previously raised more than $62 million in VC funding from
The late surge in IPOs in the second quarter is a welcome sight for the VC industry. In the face of an economic downturn, there were zero VC-backed IPOs in the first quarter of 2009 and the fourth quarter of 2008. With Medidata’s launch last week, five venture-backed companies went public in the second quarter. the five VC-backed IPOs, Medidata, SolarWinds, Bridgepoint Education Inc., DigitalGlobe Inc. and OpenTable Inc., generated more than $710 million in combined proceeds. There were no other private equity-backed IPOs in Q2, other than Rosetta Stone, according to Thomson Reuters (publisher of PE Week).
Indeed, though last week was a comparatively busy one for IPOs in general, the slate of new offerings last week did not deliver much in the way of returns for venture capital and private equity investors. Only Medidata drew previous investments from U.S.-based venture firms. Between 2002 and 2004, the New York-based company raised $22 million in venture funding, according to Thomson Reuters. Backers with the largest stakes in the company include
In its IPO prospectus, Medidata said it intends to use the IPO proceeds for acquisitions and to help pay down debt. The company, which posted a $1.7 million profit in the first quarter, is typical of what Scott Sweet, senior managing partner at research firm
“We’re starting to see [potential IPO candidates], providing they meet certain criteria,” Sweet says. “And that criteria, in a nutshell, is basically increasing revenue on the top line for several quarters as well as being either profitable or about ready to become profitable.”
Meanwhile, the good IPO vibes are expected to continue this week as LogMeIn Inc. aims to become the first VC-backed tech company to launch an IPO in the third quarter.
LogMeIn, based in Woburn, Mass, is looking to raise up to $123 million in its planned offering on July 1. The company, which provides remote-connectivity services to small and medium-sized businesses, has raised $25 million in venture funding since 2004. Its largest stakeholders include Prism VentureWorks (24% stake), Polaris Venture Partners (21% stake), 3TS Capital Partners (16%), Integral Capital Partners (9%) and Intel Capital (5%).
Another venture-backed company which expects to begin trading in the near future includes A123 Systems. Watertown Mass.-based A123 has raised $192 million in venture funding since 2001, according to Thomson Reuters. Backers with the largest stakes in the company include North Bridge Venture Partners (12.5%), General Electric (11.7%), Sycamore Networks co-founder Guruaj Desphande (10%), Qualcomm (7.6%) and Motorola (6.9%).
The company makes rechargeable lithium-ion batteries and battery systems used in automobiles.
PE Week Managing Editor Alastair Goldfisher and Reuters contributed to this story.