As healthcare provider WhiteGlove Health readies for another attempt to price its initial public offering this week, industry experts are skeptical that the firm will be able to attract investors.
“An unprofitable company with an unproven business model is a tough sell in any environment, let alone one in which there is heightened risk aversion,” says Paul Bard, research director at research and investment firm Renaissance Capital.
WhiteGlove Health, which has never posted a profit since its inception in 2006, hopes to raise $19 million by selling 2.5 million shares when it prices tomorrow (Wednesday) after the market close. That’s a far cry from $28 million the firm anticipated when it first set the IPO terms in May.
The Austin, Texas-based company, like a slew of other IPO hopefuls, postponed pricing of its shares several times this summer blaming unfavorable market conditions. The latest setbackcame last week, when WhiteGlove announced another delay and slashed its price by 32 percent to a range of $6 to $9 per share.
Experts say investors are unlikely to warm up to the listing even at a reduced price.
“Few if any serious investors are interested in this stock,” says David Menlow, president of IPOfinancial.com. “Now it is viewed upon as damaged goods. Liquidity will be almost non-existent if it actually does come to market.”
According to Bard, the company may not be able to delay the IPO for much longer as it is running low on cash.
“If they don’t complete the IPO and are unable to obtain private financing, they will be forced to re-evaluate their growth strategy or current business model,” says Bard.
WhiteGlove describes itself as a membership-based business, much like Costco or AAA. For an all-inclusive, fixed visit fee, its members have access to primary and chronic medical care, as well as some generic medications.
According to its prospectus, the company currently serves seven metropolitan markets, including Austin, Boston, Dallas, Fort Worth, Houston, Phoenix, and San Antonio.
But WhiteGlove is not making any money. The firm posted a $4.1 million loss on $3.4 million in revenue in the six months ended June 30, according to the SEC filing. During the same period last year, it lost $2.7 million on $1.8 million in revenue.
Renaissance’s Bard says investors should not read too much into WhiteGlove’s troubles in the IPO market.
“This is not the IPO that will spark a rebound in IPO activity. It is not indicative of the types of companies that make up the bulk of the IPO pipeline,” says Bard.
WhiteGlove plans to start trading on the NYSE/Amex Thursday morning under the symbol WGH. If successful, it will be the first company to go public in the U.S. since the middle of August.
WR Hambrecht and Rodman & Renshaw are the lead underwriters on the deal.
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