mchen@heraldsun.com; 419-6636
DURHAM — In early August, Inspire Pharmaceuticals Inc. announced a public offering of 22 million shares of its common stock, priced at $4.50 per share.
The company netted $109 million from the offering less than a week later.
In the month since, Cree Inc., the LED light maker in Durham, also announced a stock offering expected to bring in $434.1 million. Oxygen Biotherapeutics, a small drug development company in Durham, announced a reverse stock split for the company’s move to a major exchange. And Talecris Biotherapeutics also recently announced plans to go public, in an initial public offering that could rake in more than $800 million.
What’s to explain the rush to do stock offerings all of a sudden?
Experts say that it’s a result of pent up demand, both from companies hungry for capital and from venture capital firms eager for more liquidity, that has resulted as the market recovers from the recession, during which stock offerings and IPOs slowed to a trickle.
In his blog, President and CEO Chris Stern explained the timing of Oxygen Biotherapeutics’ proposal in the following way:
“The longer we wait to do the reverse split, the longer we will have to wait until our shares can trade on a major exchange,” he wrote. “We believe the time to act is now, since the capital markets appear to be very quiet which should allow our story to get the attention it deserves from analysts and institutional investors.”
This could portend a busy season for Triangle companies on Wall Street.
Merih Sevilir, an assistant professor of finance at UNC Chapel Hill’s Kenan-Flagler Business School, said that because the first offering — in this case, by Inspire — closed successfully and made a decent offer price, it could be sufficient signal to other companies that they can enter the market safely and confidently.
“The beginning of 2009 saw very low activity in the IPO market. A few companies planned to do IPOs, but their uncertainty was very high,” she said. “Now, you are more confident about the environment, and reduced valuation uncertainty allows you to go public at a more attractive price.”
Cree initially announced that it would offer 11 million shares at $35.50 per share in its offering. This week, the company also announced that its underwriters are exercising an overallotment option to issue an additional 1.65 million shares.
The original offering closed Wednesday, bringing in $390.5 million. With the additional shares now on the table, the company could get $434.1 million.
Cree has been vague in ways it will use the cash, except to say that it’s expecting capital expenditures of about $150 million in fiscal year 2010, and will save some for future capital needs, with the rest used for general corporate purposes. Spokeswoman Michelle Murray declined to comment further.
What looks to be favorable market conditions could also result in the largest IPO seen in the Triangle for years as well as the largest IPO in the U.S. for the year to date, according to John Fitzgibbon, publisher of IPOScoop.com.
Talecris, which is based in Durham’s Research Triangle Park and had revenues exceeding $1.4 billion in 2008, announced last week that it is offering 44.7 million shares of its stock, expected to be valued at $18-$20 per share.
Cerberus Capital Management and Ampersand Ventures, the private equity firms that own most of Talecris, will sell off 15.7 million shares, generating about $300 million in proceeds and leaving about 120 million shares of the company outstanding after the offering.
The company first attempted an IPO back in 2007. With the offering this year, Fitzgibbon said Talecris could very well succeed at grabbing more than $810 million.
The market is on the upside of a wave of IPOs, Fitzgibbon said, which means there are more companies of quality getting attention.
“As far as Talecris is concerned, doing an IPO makes a lot of sense. It’s a real company,” Fitzgibbon said.
Talecris spokeswoman Becky Levine declined to comment.
