Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : The New QLogic (ANCR) -- Ignore unavailable to you. Want to Upgrade?

To: doc who wrote (21177)	3/20/1999 3:58:00 AM
From: Kerry Lee	Read Replies (2) \| Respond to of 29386

The timing of WHEN IPO comes out will be dependent upon several factors : 1) how the roadshow with fund managers goes 2) overall market health and 3) SEC approval. For example the WEBT IPO was several weeks late ( S-1 filed in Dec, IPO did not happen until Feb 20/99 ) due to an SEC backlog caused by the huge volume of IPO's. My take is that once they file the S-1, Brocade is technically in a "quiet period" and therefore minimizes the likelihood of any major Brocade press releases during this 30+ day filing period. If I were in Brocade's shoes, I would hope to IPO by last week of April so that I could get out press releases in time for N-1 Show in Vegas the first week of May. I have glossed over the Brocade S-1 ( no time to review with fine tooth comb yet ) and have the following commentary/observations: -there appear to be approx 24 million shares not including dilution of probably 2-3 million new shares offered in the IPO..Andy Bechtolsheim ( Sun co-founder and VP at CSCO ) owns 1.2 million shares, ie 5% of Brocade -Brocade has had 4 rounds of financing ( preferred shares convertible to common ): Series A ( Aug 28/95)- 1,425,000 shares at $1.00/share Series B ( June 17/96) - 816,250 shares at $4.00/share Series C ( Dec 6/96 ) - 3,333,333 shares at $3.00/share Series D* ( Sept 29/97, Nov 17/97, Dec 3/97 )- 3,660,900 shares at $5.78/share *Series D also got 134,600 warrants at $6.78 exercise price My initial reaction is that with world class bankers like MSDW, BTAB and DRWA, despite a shaky looking S-1 ( compared to companies like BRCM )this IPO should be priced in the low-mid teens, probably somewhere between 2.5 - 3 million shares. NSM listing requires a stock price of at least $5, so mid-teens gives a margin of safety for volatility. Therefore assuming IPO pricing of $15 and 3 million shares ( ballpark )we get 27 million shares outstanding = $405 million underwriters valuation. These guys know how to conduct a roadshow and sell the story ( the red herrings always look bad )to funds..When they get a small offering of only 3 million shares, between these 3 underwriters, they'll probably get orders/indications of interest from funds of at least 3 times the size of the offering. For example, the WEBT IPO recently underwritten by Tier 2 bankers Dain/Soundview generated fund orders from the roadshow of approx 15 million shares vs the 3.5 million offered. This resulted in the WEBT IPO opening up at $38 vs IPO price of $13. Most Dain retail clients were lucky to get 100 shares at IPO pricing. Assuming, the IPO market remains healthy, I would not be surprised to see Brocade garner a $700 million - $1 billion market cap at least initially. I have more comments this weekend..I am elated to see the $24 million revenue number for 1998 and the fact that SQNT represented 72% of their 1998 revenues ( $18 million sales to SQNT in 1998 )..this is consistent with what I posted yesterday on Michael Burke thread..it also makes me more comfortable with the accuracy/reliability of G-2 that I and others have been getting. Ps - it is absolutely hilarious to see Morgan Keegan on the outside looking in.. after all they did for Brocade, they get ZERO piece of the IPO action. ROFLMAO.