Baltimore Firm Delays IPO to Wait Out Risk

Monday, November 24, 2008

When Grand Canyon Education of Phoenix went public Thursday, it was the first U.S. company to have an initial stock offering since Aug. 8. On that day, Rackspace Hosting of San Antonio broke the longest IPO dry spell since 1975.

Baltimore-based Metastorm has been among the firms declining to keep the market for public offerings going for now. Earlier this month, the business software provider said in a regulatory filing that it was withdrawing its application for an $86 million stock offering. No Washington area firms have gone public this year; last year, just three did. Last month, CapitalSource of Bethesda said it delayed the IPO of a subsidiary.

Since August, at least 29 companies have canceled or postponed their offerings on U.S. markets, according to Reuters.

Investment bank Renaissance Capital, which tracks IPO trends, noted that companies that decided to go forward with IPOs dramatically reduced their introductory stock prices and settled for less capital.

Laura Mooney, Metastorm's vice president of corporate communications, said the company would not move forward until markets turned around. Metastorm moved from Columbia in 2006.

"It's terrible [Grand Canyon] felt they had to go through with it in this market," Mooney said. "We didn't want to go out in the current environment because it's just too risky. You just don't know what's going to happen even if you raise the money you want to raise. The stocks could plummet with all the ups and downs in the capital market."

Mooney said Metastorm, which filed its plans to go public May 13, is profitable and has cash in the bank to fund operations without drawing on the public markets.

Dow Jones VentureSource reported that the $4.47 billion that companies raised in the third quarter of 2008 through IPOs and mergers and acquisitions was 66 percent lower than what the $13.4 billion generated in the same time period in 2007.

"2008 is on pace to be the worst year on record in terms of both number of IPOs and liquidity generated via IPO," said Jessica Canning, global research director for Dow Jones VentureSource. Without the ability to get more money by taking companies public, Canning said, venture capitalists aren't going to invest as much. "We may see a pullback that will have long-term effects on both the public and private markets going forward."

-- Anita Huslin


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