Clearinghouse vendor NeuStar Inc. filed plans for a $690 million initial public offering last week, a further sign that the financial drought of the past few years is slowly washing away.
Indeed, companies across the economic spectrum are seeing the light at the end of the tunnel. Wall Street is again a place of opportunities rather than a bastion of downgrades and profit warnings. Investors have reason to cheer. Although nowhere near its high point of around 5,000 points in March of 2000, the Nasdaq has been steadily climbing over the past year. After its low point of 1,300 points at the end of 2002, the Nasdaq is now hovering around 2,000 points.
“The (IPO) market is clearly a lot better than it has been,” said John Malloy, managing partner for venture-capital firm BlueRun Ventures.
For example, 18 companies held offerings in the first quarter of 2001, according to Hoover’s Inc. In the same period in 2002, that number dropped to just 11. In 2003, there were only 6 offerings during the first quarter. Things started to look up last year, however, with 36 companies holding IPOs. Already during the first quarter of this year 40 IPOs have taken place.
Further, in the fourth quarter of 2003, 48 companies held IPOs raising a total of $9.6 billion, according to Hoover’s. In the fourth quarter of last year, 80 companies raised $15.5 billion.
For wireless specifically, industry players are enjoying rising stock prices, startups are tapping into willing venture capital, and IPOs have passed from the realm of fantasy to possibility. NeuStar’s IPO filing is the latest in a series of public offerings in the telecommunications and wireless space.
For example, Syniverse Holdings Inc. in February held a relatively successful offering, while wireless gaming company Jamdat Mobile Inc. raised a solid $88.8 million in its IPO. Online device vendor InPhonic raised a major $108.9 million in its IPO in November. And Freescale, CallWave, Navteq and Global Signal Inc. have all enjoyed modestly successful IPOs over the past year.
Indeed, five telecommunications companies held IPOs in the previous quarter, according to Hoover’s, representing 6.2 percent of all public offerings during that period. Telecommunications was the fifth largest market for IPOs in the previous quarter, behind health care, media, pharmaceuticals and retail.
“The market for profitable growth companies exists,” said David Steinberg, InPhonic’s chairman and chief executive officer. “Market opportunity is becoming important again.”
Steinberg said the IPO market is now valuing companies that have a solid business plan and have shown that they can post positive numbers. This view, Steinberg said, contrasts with the IPO market during the Internet bubble.
“In 2000, it appeared that all you needed was a pulse” to go public, he said. “In 2002 through 2003, it was really tough to go public.”
Not all wireless IPO news is good, however. Seven, BrightStar and MetroPCS have all either postponed or abandoned their IPO plans.
NeuStar filed for the ticker symbol NSTR. The company manages telephone area codes and numbers and enables the routing of calls among thousands of competing communications service providers including Verizon Communications Inc., Sprint Corp., AT&T Corp. and Cingular Wireless L.L.C. The company also manages the directories for the .us and .biz Internet domains, as well as text messaging transmissions among mobile-phone users.
NeuStar said it sees significant chances for expansion through the shift from circuit-switched communications to Internet Protocol and third-generation wireless technology. The company scored revenues of $165 million in 2004 and a net income of $35.6 million, up from the $112 million in revenues and $14.4 million in net income in the previous year.
NeuStar’s lead underwriters include Morgan Stanley, Credit Suisse First Boston and JP Morgan.
“Across numerous subsectors in wireless, we see a marked growth in late-stage revenues and profits, indicative of potential liquidity options of M&As with transaction values in excess of $100 million or of IPOs,” said Rajeev Chand, senior equity analyst for wireless with Rutberg & Co. “Illustrative subsectors include: mobile broadband equipment, mobile messaging, mobile content services, enterprise WLAN infrastructure and enterprise RFID solutions.”
