CyOptics, Corsair drop IPOs amid Facebook fizzle and May’s market rout

Posted: June 05, 2012

Like many of you, I’m tired of hearing about the success/failure of the initial public offering of Facebook Inc.

But like the 2011 Philadelphia Phillies, the odds-on favorite to win the World Series, 2012’s most anticipated IPO was meant to be the match that would ignite the market for new equity issues. Given Facebook’s face-plant from $38 to $28 in just two weeks, it’s not looking good for IPO wannabes.

On May 23, CyOptics Inc., a Lehigh County maker of optical components, pulled its planned $100 million offering. Corsair Components Inc., a Fremont, Calif., maker of PC gaming hardware, shelved its $97 million IPO the next day.

However, Facebook shouldn’t catch all the blame for what could be another fallow year for IPOs. Weakening economic statistics globally and the worsening European financial crisis unnerved investors last month. U.S. equity markets shed $1.1 trillion in value in May alone.

Before Facebook’s May 18 IPO, Customers Bancorp Inc. of Wyomissing withdrew its IPO on May 8, citing "current market conditions."

Though the popular image of IPOs is that of scrappy no-name small businesses outgrowing their offices every seven months, it’s the big, established companies that are successfully tapping the public markets: General Motors (2010), Visa (2008), and Blackstone Group (2007).

It would be a stretch to call CyOptics a small business. The Upper Macungie company had revenue of $108 million in 2010 and $77 million for the six months ended June 30, 2011, according to a regulatory filing. It had 612 full-time employees as of June 30 — a bit larger than the U.S. Small Business Administration’s upper end of 500 employees for a small firm.

The same is true of Corsair, which had $455 million in 2011 revenue and 800 employees as of March 31.

Still, one local company, Globus Medical Inc., is apparently pressing ahead with IPO plans, having updated its preliminary prospectus as of May 29. The medical device maker in Audubon, Pa., had sales of $331.5 million in 2011 and 724 employees as of March 31.

As for why anyone should care about a healthy market for IPOs, a May 21 report from the nonprofit Kauffman Foundation concluded companies that go public wind up expanding their workforces. It examined the 2,766 companies that went public in the United States from June 1996 through 2010. Collectively, they employed 5.06 million people pre-IPO and 7.33 million as public companies in 2010.

In noting a 70 percent decline in IPO volume in the last 10 years compared with the average volume from 1980 to 2000, Kauffman researchers said the current IPO trickle does not bode well for future employment or economic growth.

Though Facebook seems like a rich company that only got richer with its IPO, most emerging growth companies need the millions of dollars raised through an IPO to fund their growth.

Locally, one company has gone public so far in 2012. Bucks County’s Epam Systems Inc. completed its IPO Feb. 13, raising net proceeds of $29.5 million. But this provider of information-technology outsourcing services is no garage start-up. It generated $334.5 million in 2011 revenue and employed 8,125 as of Dec. 31.

Unlike Facebook, which has seen its share price fall 27 percent in two weeks, Epam shares have risen 38 percent from its IPO price of $12.

Amid Friday’s stock market rout, Epam shares closed at $16.52, down 98 cents.

Contact Mike Armstrong at 215-854-2980, marmstrong@phillynews.com, or follow @PhillyInc on Twitter. Read his blog, "PhillyInc," at www.phillyinc.biz.

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