IPOs Are Up A Bit

April 11, 2005
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GRAND RAPIDS — Last year was a catch-up year for initial public offerings, with the most filings made in the past four years.

In 2004, there were 216 IPOs nationwide — only five fewer than were filed in all of 2001, 2002 and 2003. In 2000, prior to the dot-com bubble, there were 406.

“Based on what I saw, last year was driven by a backlog of companies that chose not to go public while the market was down, or a lot of private equity-backed firms that wanted to get liquidity but because of the market couldn’t,” said Jeff Lambert, president and managing partner of Lambert, Edwards & Associates Inc., a public relations firm that specializes in investor relations.

The IPO activity from last year spilled over into 2005, with 16 filings in January and 14 in February, but fell to 13 in March. Renaissance Capital reported that 43 IPOs had been filed nationwide this year through last month, a number down by 43 percent from the 81 filed at this time last year.

But the dollar volume of this year’s IPOs has risen by 34 percent from the same quarter last year to $9 billion. The average IPO this year has had a 4 percent return.

Financial services companies and health-care providers have filed the most IPOs, each accounting for 21 percent. Communications firms, transportation companies and consumer-related services have each accounted for 10 percent.

“But in Michigan, it’s still pretty thin,” said Lambert of the companies in the state that are going public.

There have been 1,366 IPOs nationwide from 1999 through last month. Michigan firms, however, have only accounted for 11 of those, or less than 1 percent of all the IPOs.

For three straight years, from 2001 through 2003, no company in the state went public. A grand total of three did last year: TRW Automotive Holdings, Domino’s Pizza and Asset Acceptance Capital, a company that Lambert Edwards guided through the IPO maze last year.

Three more have gone public through the first quarter of this year and all are in southeast Michigan.

  • Universal Truckload, based in Warren, went public on Feb. 11 and its dollar volume has reached $106 million, closed on the first day at $22.50 per share and has gotten a 9.3 percent return from its IPO. The company offers flatbed trucking services in the United States and Canada, has 376 employees, has been in business since 1981 and has a $335 million market cap.
  • Tarpon Industries, based in Marysville, went public on Feb. 15 and its dollar amount has reached $14 million, closed on the first day at $5.25 a share but hasn’t gotten a return from its IPO. The company makes and sells structural and mechanical steel tubing and storage rack systems, has 225 employees, has been in business for three years and has a $21 million market cap.
  • Veri-Tek International, based in Wixom, went public on Feb. 15 and its dollar volume reached $15 million, closed on the first day at $6.90 a share and has gotten a 5.8 percent return from its IPO. The company produces assembly and testing equipment for the auto and heavy equipment industries, has 41 employees, has been in business for 12 years and has a $29 million market cap.

Lambert felt there were a couple of reasons why so few Michigan companies go public. One is the state’s business core is still manufacturing, and, in general, that industry isn’t a strong sector for IPO consideration right now. At least, not when compared to financial services, health care, communications and transportation — this year’s big four, so far.

“I think the other piece of it is, about a third of all IPOs over the past several years have been venture-backed or private-equity backed,” he said.

“If you look at the capital trail, first you raise money from friends and family and then you move to the private-equity level and then to the public markets,” he added.

That middle step is often missing for companies in the state.

Michigan has long trailed other states in the amount of venture capital available for new firms, a situation that state officials brought attention to in the late 1990s. And that means there hasn’t been a strong private-equity investment in Michigan companies that could go public three to five years later, which can account for a lack of presence in the IPO market.

“I think that is where the gap is here in Michigan,” said Lambert. “But I think there are a lot of efforts trying to fill that void.”    

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