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intelliot
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 Posted: Tue Aug 03, 2004 11:57 pm Post subject: Interesting info on auction IPOs |
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| Quote: | Small auction IPO set this week ahead of Google
Mon Aug 2, 2004 04:35 PM ET
By Nicole Maestri
NEW YORK, Aug 2 (Reuters) - Before Google Inc. overwhelms the markets with its $3 billion auction-based initial public offering next week, a smaller IPO is set to come to market that will use an auction system to sell its shares to the public.
New River Pharmaceuticals Inc. has filed for a $50.4 million IPO, and the Radford, Virginia-based company will sell its shares this week using W.R. Hambrecht & Co.'s auction process, known as an OpenIPO.
While a fraction of the size of Google's IPO, it will be the first auction-based IPO to come to market since the Web search provider announced plans to use an auction for its highly anticipated IPO.
In an auction, potential investors submit bids indicating the number of shares they want to buy and at what price. In traditional IPOs, investment banks take orders from investors but use their own discretion to allocate and price shares.
Google has touted the auction process as a way to put individual investors on equal footing with big instititutional funds and influential investors who usually have better access to IPOs.
"One thing we're interested in is making the process more democratic; making our shares available to more investors," said Google co-founder Larry Page in a filing with the U.S. Securities and Exchange Commission.
But critics contend frenzied bidding by individual investors could push the share price to an unrealistic range that will quickly fall in the aftermarket and keep institutional investors from participating. Google expects to offer 24.64 millions shares for between $108 to $135 a share.
New River is offering 4.2 million shares at an estimated price of $10 to $14 each. Its offering price will be set at the highest price at which all of the shares offered can be sold to potential investors, known as the clearing price.
But Google has given itself some wiggle room, saying it could price its IPO below the clearing price to get a wider distribution of its stock or to reduce the possibility of having its shares trade lower shortly after the IPO.
New River said using an auction allows shares of an IPO to be allocated in an "equal and impartial way that does not favor some investors over others."
But auctions do not work for all companies. In May, online bookstore Alibris Inc. pulled its IPO after its auction did not produce attractive prices.
"An auction with a large number of informed bidders can be a great way for a company to discover market prices and a fair way to allocate shares in an IPO. ...An auction that attracts fewer bidders is less likely to result in an attractive price," said Alibris CEO Marty Manley in a statement at the time.
New River has applied to list its shares on the Nasdaq under the symbol "NRPH."
It said it develops safer and improved versions of widely prescribed drugs, and is focusing on developing compounds that improve upon existing amphetamine and opioid analgesic drugs.
New River said it will use the proceeds from the IPO to develop drugs that treat attention deficit hyperactivity disorder (ADHD) and acute pain as well as for general corporate purposes.
In the first quarter of 2004, New River reported no net sales and a net loss of $1.8 million. For 2003, the company also reported no net sales and a net loss of $4.8 million. |
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