June IPOs Were Not so Hot, but Summer Is Still Young

The space shuttle, Barbie and the Internet--all were once just the dreams of another crazy Californian. What helps transform these sorts of visions into reality?

Money. Lots of it.

Each week, we will take a look at the initial public offerings, or IPOs, the stock deals sold to private investors and the bond sales by California-based companies large and small. We will analyze the performance of recent deals, preview financings and look behind the scenes at the investment bankers and lawyers who put the deals together.

These are the companies that could become the next century's Arco, Bank of America or Hughes Aircraft. Or they could be the next disaster for overeager, unsophisticated investors. You'll see the trends taking shape here first.

Although June was the worst month so far this year for IPOs, 1998 has been a strong year for these first-time stock sales, with more than 40 California-based companies raising about $1.5 billion through midyear, according to IPO Monitor, a Calabasas-based data firm. That puts 1998 on track with last year, when about $1.6 billion had been raised by this time, but still short of 1996's record pace.

So far, July promises to be active. On the smaller end of the spectrum, Los Angeles-based Team Communication Group, a firm that develops television shows for PBS and the Family and Discovery channels, is expected to raise $10.5 million in an IPO led by National Securities of Chicago. The company is developing a show based on the movie "Total Recall" and just completed 22 half-hour episodes of "Amazing Tails," featuring extraordinary pets (such as rabbits that surf).

Golden State Vintners, a Greenbrae supplier of bulk wine to wineries such as Sutter Home, is expected to raise $75.3 million through Goldman Sachs, the leading underwriter of California IPOs so far this year, with 21% of the new-issue market.

As with most IPOs, especially the hot tech offerings, the average investors will have a tough time buying stock on the first day of trading, as most of the shares will be gobbled up by institutions. Later weeks might provide more opportunity as the buzz settles.

The short July 4 holiday week was lackluster. Abgenix Inc., a Fremont-based pharmaceutical company that develops products to fight transplant-related diseases and cancer, was priced Friday at $8 a share, lower than expected, and raised $20 million through BancAmerica Robertson Stephens. The stock rose just 12.5 cents on its first trading day.

That sluggishness extended even to California's ever-popular technology sector. MIPS Technology, a Mountain View-based chip design company, raised about $16.3 million after underwriting fees in an IPO through Deutsche Morgan Grenfell with stock priced at $14 a share. MIPS, a spinoff of Silicon Graphics, saw its stock fall slightly the first day to close at $13.44 a share.

"MIPS was an unqualified failure and reinforced the shiver the IPO market has been going through for the month of June," said David Menlow, president of IPO Financial Network Corp., a data firm in Springfield, N.J. "It's going to be sloppy this month."

In the last weeks of June, several California deals were priced below expectations, offering sizes were slashed and some, like Hines Horticulture, were pulled for a week until the market improved. Hines, the Irvine supplier of plants to major chains such as Home Depot, eventually sold $56.1 million in stock on June 23, but it was priced at $11 a share--about 20% less than the bottom of its expected price range. Its price failed to rise in the first day of trading.

A San Francisco-based company, Aurora Foods, maker of such well-known brands as Duncan Hines cake mixes and Log Cabin and Mrs. Butterworth syrups, raised $259 million in an IPO through Goldman Sachs on June 25. Its stock price also failed to rise on the first day of trading.

More successful June deals by California companies included Restoration Hardware, the upscale furniture store started by Stephen Gordon in Eureka in 1980, which raised $52.8 million through (who else?) Goldman Sachs. Restoration's stock price jumped 43%, from $19 a share to $26.25, on its first trading day. As with most hot IPOs, few individual shoppers got a piece. In fact, about 80% of the stock was gobbled up by major mutual funds, and a few heavyweight (i.e., multimillionaire) investors took the rest, according to Tom Taulli, analyst with IPO Monitor.

June saw several high-tech deals become smash hits. One of those, another IPO led by Goldman Sachs, was San Mateo-based Inktomi Corp., which develops software for large computer networks. It's been the second-hottest California IPO this year, behind Broadcom Corp. Inktomi stock doubled in its first day to close at $36 a share. San Jose-based Software.net Corp., which sells computer programs and packaged software over the Internet, saw its stock rise 47.2% when it went public June 17 through underwriter Deutsche Morgan Grenfell.

Offerings from some other industries also did well. Bebe Stores, a Brisbane marketer of upscale women's clothes, rose 19.9% on June 17, when it sold a $13.8-million IPO through BancAmerica Robertson Stephens. Balance Bar, a Carpinteria-based maker of nutritional snack bars, saw stock from its $10.5-million IPO rise 17.3% on June 2, its first day of trading.

What will be California's summer blockbusters? Look again to the Internet craze.

Insiders are betting on two Southland deals. GeoCities runs advertising-supported Internet "communities." The Santa Monica-based company recently filed plans to raise $72.5 million through lead manager Goldman Sachs after agreeing to settle federal charges about the way it collects and uses personal information on children. And CitySearch, a Pasadena-based company that runs city guides on the World Wide Web, just filed to sell a $50-million IPO through NationsBanc Montgomery.

Who laughed when they called this the Tech Coast?

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Tracking the Deals

IPO INDEXES

The following indexes from IPO Monitor track weekly conditions in the market for initial public offerings by measuring the the recent performance of 30 IPOs nationwide and 10 IPOs by California-based companies. Ascore of 30.9, for example, indicates that shares have risen by a mean of 30.9% from the IPO price. This week's 'exceptional rating' for California is influenced by red-hot tech tirm Inktomi, up more that 100% since its June IPO.

Last week's IPO conditions

National: Healthy

California: Exceptional

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U.S.: 9.3

CALIF.: 30.9

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Rating system:

Less than 7: Poor

8-15: Healthy

16-20: Strong

21-25: Outstanding

26 or more: Exceptional

Data provided by IPO Monitor

WHO'S RAISING MONEY AND HOW

UPCOMING DEALS:

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COMPANY: Golden State Vintners

TICKER SYMBOL: VINT

CITY: Greenbrae

INDUSTRY: Winery

SIZE, IN MILLIONS: 40.9

OFFERING: IPO

ESTIMATED PRICE: $16-$19

UNDERWRITER: Goldman Sachs

DATE: 6/21

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COMPANY: Team Communications

TICKER SYMBOL: TMCG

CITY: Los Angeles

INDUSTRY: Media

SIZE, IN MILLIONS: $10.5

OFFERING: IPO

ESTIMATED PRICE: $5.50-$7

UNDERWRITER: National Securities

DATE: 7/6

Recent IPOs

COMPANY: Aurora Foods

TICKER SYMBOL: TK

CITY: San Fran.

INDUSTRY: Food

SIZE, IN MILLIONS: $297.8

OFFERING PRICE: IPO

PRICE ON 7-2: $20-$23

UNDERWRITER: Goldman Sachs

DATE: 6/21

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COMPANY: MIPS Technologies

TICKER SYMBOL: MIPS

CITY: Mountain View

INDUSTRY: Tech

SIZE, IN MILLIONS: $17.5

OFFERING PRICE: $14.00

PRICE ON 7-2: $12.75

UNDERWRITER: Deutsche Morgan

DATE: 6/30

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COMPANY: Transnatl. Financial

TICKER SYMBOL: TFN

CITY: San Francisco

INDUSTRY: Financial

SIZE, IN MILLIONS: $7.3

OFFERING PRICE: $7.25

PRICE ON 7-2: $7.38

UNDERWRITER: Tejas Securities

DATE: 6/25

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COMPANY: Abgenix

TICKER SYMBOL: ABGX

CITY: Fremont

INDUSTRY: Biopham.

SIZE, IN MILLIONS: $20.0

OFFERING PRICE PRICE: $8.00

PRICE ON 7-2: $8.13

UNDERWRITER: BancAmerica R.S.

DATE: 7/2

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COMPANY: Collateral Therapeutics

TICKER SYMBOL: CLTX

CITY: San Diego

INDUSTRY: Biotech

SIZE, IN MILLIONS: 43.3

OFFERING PRICE: IPO

PRICE ON 7-2: $11-$13

UNDERWRITER: Bear Stearns

DATE: 6/21

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COMPANY: Hines Horticulture

TICKER SYMBOL: HORT

CITY: Irvine

INDUSTRY: Nursery

SIZE, IN MILLIONS: 80.0

OFFERING PRICE: IPO

PRICE ON 7-2: $11

UNDERWRITER: Lehman Bros

DATE: 6/24

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COMPANY: Restoration Hardware

TICKER SYMBOL: RSTO

CITY: Eureka

INDUSTRY: Retail

SIZE, IN MILLIONS: 52.8

OFFERING PRICE: IPO

PRICE ON 7-2: $19

UNDERWRITER: Goldman Sachs

DATE: 6/19

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COMPANY: Interplay Entertainment

TICKER SYMBOL: IPLY

CITY: Irvine

INDUSTRY: Tech

SIZE, IN MILLIONS: 27.5

OFFERING PRICE: IPO

PRICE ON 7-2: TK

UNDERWRITER: Piper Jaffray

DATE: 6/19

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COMPANY: Sofware.net Corp

TICKER SYMBOL: SWNT

CITY: Irvine

INDUSTRY: Tech

SIZE, IN MILLIONS: 45.0

OFFERING PRICE: IPO

PRICE ON 7-2: 9

UNDERWRITER: Deutsche Morgan

DATE: 6/17

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COMPANY: Bebe Stores

TICKER SYMBOL: BEBE

CITY: Brisbane

INDUSTRY: Retail

SIZE, IN MILLIONS: 13.8

OFFERING PRICE: IPO

PRICE ON 7-2: 11

UNDERWRITER: BancAmerica

DATE: 6/17

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COMPANY: Showpower Inc

TICKER SYMBOL: TK

CITY: Rancho

INDUSTRY: Dom Power

SIZE, IN MILLIONS: 13.2

OFFERING PRICE: IPO

PRICE ON 7-2: 11

UNDERWRITER: TK

DATE: 6/15

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COMPANY: NetGravity

TICKER SYMBOL: TK

CITY: San Mateo

INDUSTRY: Tech

SIZE, IN MILLIONS: 27.0

OFFERING PRICE: IPO

PRICE ON 7-2: 9

UNDERWRITER: BancAmerica

DATE: 6/12

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COMPANY: Inktomi Corp.

TICKER SYMBOL: INKT

CITY: San Mateo

INDUSTRY: Tech

SIZE, IN MILLIONS: 36.0

OFFERING PRICE: IPO

PRICE ON 7-2: 18

UNDERWRITER: Goldman Sachs

DATE: 6/10

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COMPANY: Balance Bar

TICKER SYMBOL: BBAR

CITY: Carpenteria

INDUSTRY: Retail

SIZE, IN MILLIONS: 10.5

OFFERING PRICE: IPO

PRICE ON 7-2: 10.50

UNDERWRITER: Hambrecht

DATE: 6/2

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OTHER DEALS

COMPANY: International Lease

TICKER SYMBOL: TK

CITY: Los Angeles

INDUSTRY: Lease

SIZE, IN MILLIONS: 125.0

OFFERING: Secondary

ESTIMATED PRICE: 99

UNDERWRITER: Lehman

DATE: 6/16

*

COMPANY: Earthlink Network

TICKER SYMBOL: TK

CITY: Pasadena

INDUSTRY: Tech

SIZE, IN MILLIONS: 144.0

OFFERING: Secondary

ESTIMATED PRICE: 60

UNDERWRITER: Duetsche Morgan

DATE: 6/17

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COMPANY: InterVU

TICKER SYMBOL: TK

CITY: San Diego

INDUSTRY: Tech

SIZE, IN MILLIONS: 17.2

OFFERING: Secondary

ESTIMATED PRICE: 13

UNDERWRITER: Joesphthal

DATE: 6/18

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COMPANY: PacificAmerica

TICKER SYMBOL: TK

CITY: Woodland Hills

INDUSTRY: Mort

SIZE, IN MILLIONS: 63.0

OFFERING: Notes

ESTIMATED PRICE: market

UNDERWRITER: Merrill

DATE: 6/19

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Source: IPO Monitor, Securities Data Inc., IPO Financial Network

Deal Spotlight

Golden State Vintners, the Greenbrae-based maker of bulk wine for major wineries such as Sutter Home and a supplier of private-label wine for Trader Joe's, plans an IPO today. "This is a name that is recognized in the industry, one of the largest bulk wine processors. It has all the right trimmings," said David Menlow, president of IPO Financial Network Corp. "They've also got the best underwriter in the business, in our opinion.

TICKER: VINT

UNDERWRITER: Goldman Sachs

RANGE: $16-$19

AMOUNT TO BE RAISED: $75.3 million

Editor's Note

In an effort to spotlight California's next Walt Disney Co. or Yahoo Inc., each Monday The Times will feature California Dealin', a new column tracking the growing companies based here that are raising big bucks from America's investors.

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Debora Vrana covers investment banking for The Times. She can be reached at debora.vrana@latimes.com.

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