Two O.C. Companies Test Testy Market
Two Orange County companies took the plunge into a rough stock market Friday, floating initial public offerings with mixed results.
First Alliance Corporation, an Irvine-based lender specializing in home mortgages for high-risk borrowers, raised $59.5 million with its sale of 3.5 million shares on the Nasdaq exchange. The stock closed its first day of trading at $18.63 after opening at $17 a share.
Although the starting price was at the low end of the $17-to-$19 range the company had targeted for its shares, First Alliance officials said the sale fulfilled their expectations.
“We are very excited about closing the transaction,” said Mark Mason, chief financial officer of First Alliance.
Yorba Linda-based Research Engineers Inc. didn’t fare as well. The engineering software products maker raised $6.5 million Friday, well below the $10 million it had hoped to garner to finance future acquisitions.
Investors bought up 1.3 million shares at the opening price of $5 each, and the stock closed its first day of Nasdaq trading at $5.19. The company had hoped to sell 1.5 million shares at an initial price of $6 to $7.50, according to its Securities and Exchange Commission filing.
“The market has obviously gone down since we set the price range--that’s the bottom line,” said Brian Paul, chief financial officer for Research Engineers. “Obviously, we would have liked the higher price . . . but we’ll put the money to good use and grow the company significantly.”
The volatile stock market has dampened investors’ enthusiasm for initial public offerings IPOs in recent weeks. A number of companies have stalled or even shelved plans to go public until the market settles down.
Ryan Jacob, research director for New York-based IPO Value Monitor, said firms that have forged ahead with their IPOs are being forced to lower the offering prices of their stocks to adjust for weak demand.
“‘A lot of deals right now are at the lower end of the range, or below the range,” anticipated in SEC filings, Jacob said. “It’s a buyers’ market for IPOs right now. Investors’ appetite for risk is very low given the volatility of the market.”
Although other companies have backed away from new stock sales of late, Mason said First Alliance was confident that the offering price would meet expectations set down in the SEC filing.
“We had a strong transaction and we felt it was appropriate to complete it given the very favorable response from investors,” Mason said.
Paul was more circumspect and declined to explain why Research Engineers chose not to wait for more optimal market conditions.
“No one can predict what the market is going to do,” Paul said. “None of us has a crystal ball.”
