Upcoming Offering: Neoware Systems Secondary Pricing Tonight
by Jon C. Ogg
Date Created: 2/15/2006 12:39:00 PM EST
Date Created: 2/15/2006 12:39:00 PM EST
This current Neoware Systems Inc (NWRE-NASDAQ; $24.73, +$0.36) 2.5 Million share secondary offering set for pricing tonight has actually been very well tolerated since the initial "no-cares" from the street after the secondary filing last week, particularly considering it is an extra 10% of the outstanding shares being added to its float. Part of the reason the stock wasn't reacting well to the initial news of a secondary filing was that Jim Cramer noted the stock bearishly last week during his Lightning Round segment of "Mad Money" show on CNBC right around the same time the company announced its filing to sell the shares.
Neoware raised its 2006 internal projections with earnings 2 weeks ago, although the stock is off of recent high's of almost $30.00. Neoware has been one of the only/few niche players that has ever been able to show success in this thin-client systems arena since so many independents that have tried to penetrate this market with any impact have failed and many have since disappeared. The company boasts such clients as Lockheed Martin, Federated, Cook County (Chicago), Barclays Bank, AirCanada, Caesers, as well as many others.
One reason the offering is now being accepted well is because all of the proceeds are going to the company for general corporate purposes and potential acquisitions instead of just going to a family holder or old VC-backer. The company is also further strengthening or shoring up their balance sheet after the recent stock strength. As of its latest financial reports on 12/31/05 the company posted the following data: Total assets $123.7M, Current assets $65.2M (about $10M of which was cash), current liabilities of $18.7M, and total liabilities of only $21.8M.
Another reason the deal is being well received is because there has also been some recent "chatter" circulating that the company will be announcing more large enterprise- size (large corporate or government/university/hospital) contracts in the coming weeks, although no names have been really offered as to who or which groups may be awarding the contracts. It is very possible that this may be more speculation than actual reality, although it does fit in with the history of such offerings from high-growth companies.
Last summer when the stock was around the $11.00 or $12.00 level this was also looked at internally here as a potential "should-be" takeover name, but the 100% stock gain has likely removed much of that potentiality (as well as this secondary likely removing such hopes) for the time being. While this was on a watch list for our Bait Shop Report, it was never an official Bait Shop Recommendation by us as there were no would-be buyers that we were able to track down or surmize. If this company takes much of a hit on its share price and the valuations come back closer to where they were in the middle of last year, then it is very possible we will look at this again as a company that a predator should consider taking over. The current valuations and multiples on its Price-to-Book and Price-to-Earnings ratios are the only concerns we currently have on the company, although this company has not even come anywhere close to reaching any ceilings on the amount of new large customer wins that would cause concerns about its growth prospects.
Lehman is the book runner on the deal and it now doesn't look like they had any real issues placing the stock after this morning. This has been presented to more "Buy and Hold" type of accounts instead of the fast money crowd that prefers the quick in-and-out trades as they often shy away from stocks that are already up 100% in the last 6 or 7 months. The deal should price tonight and it appear as of right now that it will not come out at any significant discount to its closing price today.
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Neoware raised its 2006 internal projections with earnings 2 weeks ago, although the stock is off of recent high's of almost $30.00. Neoware has been one of the only/few niche players that has ever been able to show success in this thin-client systems arena since so many independents that have tried to penetrate this market with any impact have failed and many have since disappeared. The company boasts such clients as Lockheed Martin, Federated, Cook County (Chicago), Barclays Bank, AirCanada, Caesers, as well as many others.
One reason the offering is now being accepted well is because all of the proceeds are going to the company for general corporate purposes and potential acquisitions instead of just going to a family holder or old VC-backer. The company is also further strengthening or shoring up their balance sheet after the recent stock strength. As of its latest financial reports on 12/31/05 the company posted the following data: Total assets $123.7M, Current assets $65.2M (about $10M of which was cash), current liabilities of $18.7M, and total liabilities of only $21.8M.
Another reason the deal is being well received is because there has also been some recent "chatter" circulating that the company will be announcing more large enterprise- size (large corporate or government/university/hospital) contracts in the coming weeks, although no names have been really offered as to who or which groups may be awarding the contracts. It is very possible that this may be more speculation than actual reality, although it does fit in with the history of such offerings from high-growth companies.
Last summer when the stock was around the $11.00 or $12.00 level this was also looked at internally here as a potential "should-be" takeover name, but the 100% stock gain has likely removed much of that potentiality (as well as this secondary likely removing such hopes) for the time being. While this was on a watch list for our Bait Shop Report, it was never an official Bait Shop Recommendation by us as there were no would-be buyers that we were able to track down or surmize. If this company takes much of a hit on its share price and the valuations come back closer to where they were in the middle of last year, then it is very possible we will look at this again as a company that a predator should consider taking over. The current valuations and multiples on its Price-to-Book and Price-to-Earnings ratios are the only concerns we currently have on the company, although this company has not even come anywhere close to reaching any ceilings on the amount of new large customer wins that would cause concerns about its growth prospects.
Lehman is the book runner on the deal and it now doesn't look like they had any real issues placing the stock after this morning. This has been presented to more "Buy and Hold" type of accounts instead of the fast money crowd that prefers the quick in-and-out trades as they often shy away from stocks that are already up 100% in the last 6 or 7 months. The deal should price tonight and it appear as of right now that it will not come out at any significant discount to its closing price today.
If you wish to subscribe directly to our newsletter and email list on upcoming IPO's, please send an email to info@newscontrast.com and label it "IPO email request." We do not sell our lists and do not share our email list with any outside partners or vendors.
posted by Jon C. Ogg at 4:48 PM
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