Protonex Exits The Public Market To Save Money
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Scott Pearson, CEO of Southborough-based Protonex.
In mid-2006 when officials at Protonex Technology Corp., the Southborough fuel cell manufacturer, decided to do an initial public offering of the company’s stock on the London Stock Exchange, CEO Scott Pearson said he was hopeful the move would attract some public investors to help grow the company.
Then the international economy tanked, along with the Protonex stock, which dropped more than 300 percent.
Now, Protonex, which has struggled to make a profit the past few years, has gone back into the private market once again in an attempt to raise capital.
It’s part of a recent trend over the past few years of companies jumping from public markets.
Although, according to Dow Jones Venture source, the trend is slowing. In 2007, 77 companies left the public markets. In 2008, there were 65 that went private. Last year that number decreased to 40 and this year there have been 20.
But according to Ben Howe, president and founder of Boston-based financial advisory firm America’s Growth Capital, which advised Protonex on the move, it’s still a wise decision.
“Now is an outstanding time to consider going private,” Howe said. “There are billions of dollars in private equity sitting on the sidelines looking to be invested in technology firms. It’s more than we’ve ever seen.”
Advantages & Disadvantages
Going private can open companies up to new investors, and can be a money-saver. According to a filing with the U.S. Securities and Exchange Commission, Protonex estimates it will save $375,000 with decreased regulatory costs for reporting financial and legal information.
While some companies are going private, some venture-backed companies are considering going public.
In the second quarter of this year there were 15 IPOs of venture-backed companies, which raised a total of $899 million. That is an increase from only 3 venture-backed IPOs in the same quarter last year.
“Since confidence in the overall market has begun to stabilize compared to a few years ago, we’re starting to see some IPOs come back,” said Jessica Canning, director of global research for Dow Jones Venture Source, which tracks IPOs.
But both figures pale in comparison to the height of the IPO market in 2007 when that year’s second quarter alone saw 25 venture-backed IPOs net more than $2.5 billion.
One local company that recently went the public route was Ameresco.
The Framingham-based company ended up coming up short with its IPO, raising $87 million through the sale of 6 million company-owned shares and 2.7 million shareholder-owned shares. Ameresco had hoped to raise $160 million through the IPO.
Ameresco’s underwhelming IPO backs the view of Kathleen Shelton Smith, chairman of Renaissance Capital in Connecticut, who said companies should have a legitimate reason for wanting to go public.
“You ought to be a business that can stand the test of some very high scrutiny of investors,” she said. “In today’s age, investors are much more cautious. They are being really picky.”
Along with the IPO market improving, the mergers and acquisitions sector has remained fairly stable in recent quarters, according to Dow Jones VentureSource.
In the second quarter of 2010 there were 79 mergers or acquistions of venture-backed companies, worth about $4.3 billion. That compares to 82 deals during the same time period last year.
For one local company, Camiant in Marlborough, its recent merger was less about the economic conditions and more about finding the right strategic partner at the right time, according to Susie Kim Riley, co-founder and CTO at Camiant.
The company — founded in 2003 — creates software for broadband service providers to manage the network infrastructure. It has about 115 employees.
Camiant executives had been approached numerous times in the past two years about a possible sale of the company, but Riley said earlier this year when North Carolina-based Tekelec approached the company, it seemed like a perfect fit.
Tekelec specializes in similar network infrastructure software for telecommunications.
“We certainly were not looking for buyers,” Riley said.
“We’re in growth mode, we have strong venture backers. But Tekelec brought a very unique value proposition and an opportunity to work with a company that has the same vision and the desire to take the services to the next level.”
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