California IPOs Led the Market in 1996

Fast-growing California companies drove the market for initial public offerings last year, and their stocks’ initial gains were well above the national average.

In California in 1996, a record 184 companies went public, raising a total of $7.3 billion. Computer, telecommunications and biotech firms led the way.

As a result, companies involved in those industries continued to dominate The Times’ list of best-performing California IPOs, measured from their 1996 offering prices to market prices on April 18.

“Based on volume and demand, California led the market for the year,” said Henry Taibo, equity research analyst with CommScan, a New York securities research firm.

Nationwide, 1996 shattered all records for IPOs. A total of 739 U.S. firms raised $43 billion, surpassing the 682 IPOs and $39.6 billion raised in what had been the previous record year, 1993.

California IPO stocks, as a whole, performed better than their national counterparts, gaining 28% in price 90 days after their public offerings in 1996, while non-California IPOs gained just 22%, CommScan found.

So far this year, the IPO market has cooled as investor interest in smaller stocks has waned. But last year, firms such as Yahoo Inc., Ingram Micro Inc. and Mossimo Inc. made headlines with their IPOs.

However, it was a little-known firm called Cymer Inc., a San Diego semiconductor equipment maker, that gave investors the best return on their money last year: a whopping 336.8% by April 18, to be exact, although the stock has declined some since.

The 10-year-old company floated 3.4 million shares to the public at $9.50 each in September. The price rocketed as high as $56, but has been trading recently at about $44 on Nasdaq.

Cymer, which has nearly 500 employees, makes ultraviolet lasers that print tiny circuit patterns onto silicon wafers to make microprocessors and memory chips.

“We thought this marketplace would take off in the 1991-92 time frame, [but] I’m happy to see it take off now. For quite some time now we’ve been waiting for this,” said company founder and President Robert Akins, 45.

In fact, Cymer’s sales more than tripled to $65 million last year from $18 million the previous year, boosted by orders from such giants as Intel and Motorola. About two-thirds of the company’s business is overseas.

“They have a near-monopoly on the lasers you need for the most advanced chips,” said Brett Hodess, an analyst with Montgomery Securities in San Francisco. “Since they’ve been public, they’ve beaten our profit and sales estimates every quarter.”

After Cymer, the next-best-performing IPO in the Times 100 survey period was by Remec Inc., another San Diego firm.

Remec makes and designs products for the wireless communications industry. The company, which has more than 700 employees, has seen its stock climb 190% since its February 1996 offering of 3 million shares at $8 each. Earlier this year, the company completed a secondary offering of 2.75 million shares at $23. The stock has recently traded at about $25 on Nasdaq.

Technology-related companies continued to post the best returns of all IPOs, especially in the last three years, with the average technology IPO up 25.7% on the first day of trading, according to a new report by Prudential Securities.

The total one- and two-year average returns on tech IPOs were 70.3% and 231.8%, respectively.

In contrast, new deals in the basic-industry and energy areas performed poorly.

Among California IPOs, also near the top of our performance list is Cohr Inc., a 2-year-old Chatsworth company that provides equipment-servicing and group-purchasing services to hospitals throughout the nation.

Cohr, with nearly 600 employees, also had the best-performing IPO of any Los Angeles County-based firm during the Times 100 survey period. The company’s stock price has surged 125% since it went public at $9 a share last year. It has recently traded at about $23 on Nasdaq.

“This company has a brilliant strategy for growing their equipment-buying services,” said John Calcagnini, analyst with Oppenheimer & Co. in Los Angeles, which makes a market in the stock. “They operate in a fragmented industry. What Cohr does is go in and acquire the mom-and-pops they compete with and then expand them.”

Another top performer is Invision Technologies Inc., a Foster City-based maker of explosives-detection equipment for airlines. It went public at $5.50 a share and had more than doubled to $14.50 by April 18 on Nasdaq.

The stock skyrocketed in the wake of the TWA jet crash off Long Island in July. But by October, some investors were predicting that the company’s stock would drop because its products were too slow and expensive.

However, the shares have recently traded at about $16 on Nasdaq, near their record high of $17.875.

Invision recently reported first-quarter earnings of $642,000, or 6 cents a share, contrasted with a loss of $1.2 million, or 17 cents a share, a year earlier.

The largest California IPO of last year was Ingram Micro, the world’s biggest distributor of computer products. The Santa Ana company completed a $360-million IPO for about a third of its stock and has since seen its share price increase 31.9%.

Ingram planned to use the money raised to pay off debt as it expands its computer-products distribution empire. In 1996 the company reported that its profit was up 31% from the previous year as sales rose 40% to $12 billion.

The fourth-best IPO performer was Yahoo, a Santa Clara-based provider of Internet search services. On their first day of trading a year ago, shares opened at $24.50, up 88% from the offering price of $13. At the end of the day, the stock closed at $33, posting a whopping 154% gain.

The stock was up 138% during the Times 100 period and has recently traded at about $35 on Nasdaq. But as with most companies with Internet businesses, investors are betting on the future: Yahoo is barely profitable now.

“On these tech companies, it’s hard to meet and continue those expectations,” said Taibo, the equity research analyst with CommScan.

*

Indeed, many California IPO companies have been unable to live up to investors’ expectations, with their stocks falling well below the IPO prices, according to data collected by San Francisco-based IPO/Crossroads.

For example, Children’s Wonderland Inc., an Agoura Hills-based day-care operator, has seen its stock plunge 63% from the IPO price of $4.50 a share. Company executives say they don’t know why the stock has fallen.

Chicago Pizza & Brewery, a Mission Viejo-based brewery and grill chain with 29 locations, has seen its stock drop 78% since its October IPO. The company reported a loss of $2.3 million for 1996, compared with a loss of $1.6 million the previous year.

Other troubled IPOs include Irvine-based Mossimo, the hip clothing maker. Its stock has been trading recently at about $6 on the New York Stock Exchange, versus an $18-a-share offering price. Diedrich Coffee Inc., an Orange County-based coffeehouse operator, has seen its stock drop more than 67% since its IPO last year.