No-Go IPOs

Critics point out that going public in this fashion doesn’t bring aftermarket sponsorship—the support of research analysts and traders that is an implicit part of the IPO contract between an issuing company and its underwriters. In the worst case, such a transaction can mean that the newly christened company still secures much needed cash. But from the point of view of an investor trading the stock, the company lacks liquidity and may be public in name only.

Cardiovascular Systems filed to go public in January 2008; it withdrew its IPO filing in November when it announced the transaction with Replidyne. Four other local companies hoped to go public in 2008, but have now withdrawn their filings: IDS Group, Milestone AV Technologies, Transoma Medical, and Vision-Ease Lens Corporation. Another Twin Cities company, AGA Medical, remains on file, presumably awaiting better markets. No Minnesota company has gone public in 2008.

Of the many experts contacted for this column, none could say when the IPO market will return. Some were bearish to the point of being grim. Others were more sanguine. Perhaps Hartfiel summed it up best: “Right now, we’re crossing the ocean in a fog. This is uncharted territory. Who knows when we’ll hit land again.”

Guest columnist and “Capital Beat” alum Sven Wehrwein is a former CFO and investment banker. He serves on the boards of various Twin Cities companies. Dave Beal will return to the “Capital Beat” in our March issue.