Seventeen initial public offering are scheduled to come to market this week, and analysts think the two to watch are Guidance Software and IPG Photonics.
The planned deals represent the final rush before the holiday slowdown in the IPO market. So far, only six deals are scheduled to be priced next week. Typically, the new issues market all but shuts down Christmas week and doesn’t show much life until mid-January.
Renaissance Capital, an institutional money management and IPO research firm in Greenwich, Conn., said year-to-date IPO dollar volume is up 19% from last year to $38.1 billion while the number of deals declined to 173 this year from 194 last year. But if IPOs scheduled this week and next come to market, this year’s deal flow will be about the same as 2005.
“The IPO market is stronger than the general public realizes,” said John E. Fitzgibbon, Jr., founder of IPOScoop.com. “Guidance Software could be the sleeper of the week.”
Guidance develops what it calls “forensic software” for “digital investigations.” The software allows corporations and governmental agencies to search, collect, preserve and analyze data stored on servers, desktops and laptops from a single location. The IPO is expected to be priced Wednesday and trade Thursday under the proposed Nasdaq symbol GUID.
IPG Photonics develops and manufactures high-performance fiber lasers for a range of applications, including medical and manufacturing. The deal also is expected to be priced Wednesday and trade Thursday under the proposed Nasdaq symbol IPGP.
Guidance's flagship product, EnCase Enterprise, is used by about 95 major companies in the U.S. and about 1,000 governmental and law enforcement agencies and other customers worldwide.
Guidance Software isn’t yet profitable and reported an accumulated deficit of $8.8 million on Sept. 30. However, revenue increased to $39.4 million for the nine months ended September 30, 2006 from $27.2 million for the same period a year ago.
Guidance Software competes against major accounting firms such as Ernst & Young, consulting companies and traditional security companies such as McAfee and Symantec that offer blocking and monitoring technologies for incident response.
Guidance Software of Pasadena, Calif. plans to offer five million shares, including 1.75 million by current stockholders, at $12.50 to $14.50 each through underwriters led by Morgan Stanley.
The company expects to raise about $37.3 million in the IPO and plans to use the net proceeds for general corporate purposes and working capital. Guidance will receive nothing from the sale of shares by current stockholders.
IPG's New Technology
IPG Photonics said its new technology combines the advantages of semiconductor diodes, including long life and high efficiency, with the high amplification and precise beam qualities of specialty optical fibers. In its registration filed statement with the Securities and Exchange Commission, IPG Photonics said its devices are cheaper than traditional equipment and are beginning to displace CO2 and crystal lasers.
IPG Photonics reported net income of $7.4 million on sales of $96.4 million for the year ended Dec. 31. 2005 and net income of $12.6 million on sales of $101.1 million for the nine months ended Sept. 30, 2006.
The company has about 300 customers worldwide, but like many new companies, its customer base is narrow. In the last three years, IPG’s top five customers accounted for 37%, 38% and 31% of sales.
Competitors include Coherent, GSI Group and the Scientific-Atlanta division of Cisco Systems.
IPG Photonics of Oxford, Mass. plans to offer nine million shares, including 2.8 million by current stockholders, at $13.50 to $15.50 each through underwriters led by Merrill Lynch. The company will receive nothing from the sale of shares by current stockholders. IPG Photonics expects to raise about $81.8 million in the IPO and plans to use the net proceeds to repay debt and for general corporate purposes.