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Wednesday, October 04, 2006

San Diego Union-Tribune Quotes 24/7 Wall St.

In an article about the IPO market, the largest paper in San Diego, the Union-Tribune, quoted 24/7 Wall St. on the subject:

IPOs drop nationwide for venture-backed firms

Two local companies have raised money

October 4, 2006

The number of venture capital-backed companies that sold stock through initial public offerings plummeted nationwide during the third quarter, according to an industry survey released yesterday.

But whether the chilly reception reflects a transitory cold snap or a prolonged deep freeze for IPOs is uncertain.

During the three months ended in September, eight venture-backed companies went public, raising a total of $934.2 million, according to the survey by the National Venture Capital Association and Thomson Financial.
The amount raised was 40 percent lower than the same period last year, when 19 companies collected $1.46 billion, and was described by the venture capital association as the slowest quarter since 2003.

“The venture-backed IPO volume has fallen to alarmingly low levels,” NVCA President Mark Heesen said in a statement. He added that the results suggest “the public markets are not the destination they once were for emerging growth companies.”

San Diego did not buck the overall decline in venture-backed IPOs, but the region didn't exactly fit the trend, either.

“I'm surprised that the national number is down as much as it is,” said Don Williams, who heads the venture technology practice in Ernst & Young's San Diego office. “I don't believe it reflects what's going on in Southern California.”

So far in 2006, only two local venture-backed companies have sold stock through IPOs. DivX, a San Diego maker of video compression software, raised $145.6 million in an IPO last month, and Alphatec Holdings, a Carlsbad medical technology company, raised almost $84 million in June.
But two other local ventures, Artest Medical and Cadence Pharmaceuticals, have submitted filings in preparation for IPOs, and Williams said two Orange County companies also have registered to sell stock to the public.

“There is a good bit of activity that we're continuing to see not only in Southern California, but in San Diego,” Williams said.

San Diego's SAIC also is nearing the debut of a public stock offering that is expected to raise more than $1 billion – and will likely rank among the biggest IPOs of the year.
The nationwide slowdown in venture-based IPOs also was sharply at odds with the broader trend on Wall Street, where enthusiasm for IPOs is running at the highest pace in six years.
So far in 2006, 149 IPOs have raised $32.2 billion – the most since 2000 – according to data compiled by Bloomberg.

Corporate buyout activity also has been running higher, with Bloomberg counting a record $1.19 trillion in merger and acquisition deals so far this year.

But the venture capital association also found a slowdown in corporate buyout activity, with only 74 venture-backed companies acquired during the quarter. That was down 24 percent from the 98 deals in the third quarter of 2005 and continued a decline from the 104 deals in the first quarter of this year.

The difference is chiefly because of Wall Street's waning appetite for high-risk deals, said Douglas McIntyre, a business journalist and co-author of 24/7 Wall Street, a blog that tracks IPO activity.

“From my standpoint, the critical difference is that most VC-backed companies are not very large,” McIntyre said. “It's a little bit of whining on the part of the venture capital association, because some of the companies they're trying to put out there are not as primo as other IPO candidates.”

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