The larger SPACS may end up doing deals with companies who find their route to a traditional IPO blocked by unsettled market conditions:
IPO Market Withers While SPACS Thrive
Tuesday February 19, 11:35 am ET
By Kristen Lee, AP Business Writer
So-Called Blank Check Companies Offer an Alternative to a Floundering IPO Market
NEW YORK (AP) -- The current state of the market for initial public offerings is perhaps best encapsulated by the example of Critical Homecare Solutions Holdings Inc., which formally applied to withdraw its IPO registration statement on Friday.
The company, which provides patients with home intravenous drug services, has instead decided to go public through a takeover by blank check company MBF Healthcare Acquisition Corp. for $420 million.
"The transaction with MBF meets our goal of becoming a publicly traded company," said President and Chief Executive Robert Cucuel, who will continue to control the business after the takeover, in a statement.
The IPO market has slowed to a crawl this year as cresting fears about a possible U.S. recession have squelched enthusiasm for riskier, speculative investments.
Meanwhile, special purpose acquisition companies are thriving. SPACS, or so-called blank check companies, are publicly traded shells created to acquire an existing company.
The deals have gained popularity among investors for offering a measure of certainty. Shareholders are given the power to approve or reject potential acquisitions. And, if a deal is not completed within a certain timeframe -- usually two years -- investors will get most of their money back.
In an IPO market in which only the sexiest offerings will do well, SPACS also offer an alternate strategy to companies that want to go public.
No traditional IPOs are scheduled to price this week, but several SPACS are coming to market, including China Resources Ltd. and Global Alternative Asset Management Inc.
China Resources is a blank check company formed to buy a company in the mining or natural resources sector in China. Global Alternative Asset Management is targeting the alternative asset management sector.
Meanwhile, more IPOs continue to pull out of the IPO market.
Concentric Medical Inc., which makes devices to treat stroke patients, reported Friday that it has canceled its planned IPO due to market conditions.
In the filing, Concentric said it "is requesting such withdrawal because of unfavorable market conditions that would adversely affect the offering of the securities under the registration statement and its decision to pursue other financing alternatives."
Other companies to formally cancel IPOs this month include Forum Oilfield Technologies Inc., BCD Semiconductor Manufacturing Ltd., Plains GP Holdings LP, Light Sciences Oncology Inc., Tully's Coffee Corp., Archemix Corp. and Biolex Therapeutics Inc.
Almost all of the companies cite market conditions as the reason for opting out of an IPO.
The reversal in the IPO market, which boomed for most of 2007, was reinforced last week by the poor debuts of ArcSight Inc., a provider of data security software, and medical device company Mako Surgical Corp.
Mako Surgical has fallen 3 percent from its offering price of $10.
Scott Sweet, managing director of research firm IPO Boutique, said ArcSight would be a solid offering under normal market conditions. But ArcSight, which priced at the low end of expectations, has fallen about 4 percent from its IPO price of $9.
biz.yahoo.com |
