Codexis, DynaVox Price at Low End on Busiest Day for U.S. IPOs This Year

Codexis Inc. and DynaVox Inc. priced initial public offerings at the low end of their ranges, while four deals were reduced or delayed on the busiest day for U.S. IPOs in more than two years.

Codexis, which makes enzymes used in producing drugs and ethanol from wood and grass, raised $78 million yesterday. DynaVox, the seller of speech software for people with language disabilities, priced $141 million of shares, filings with the Securities and Exchange Commission and Bloomberg data showed. Alimera Sciences Inc. cut its offering by 29 percent and Excel Trust Inc. pushed back a $270 million IPO to today.

The companies were all asking investors to pay a premium for their shares after a rally in U.S. stocks to an 18-month high spurred a revival in IPO demand. Buyers extracted bigger concessions from underwriters yesterday after nine of the prior 10 deals were sold within or above their offer prices.

“There is demand there for IPOs, but buyers are highly selective and only willing to step in for what they believe are reasonable values,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC and manager of the Direxion Long/Short Global IPO Fund. “Any attempt to extract values beyond what people see is reasonable will fail. That’s what we see in today’s action.”

First-Day Trading

The first-day performance of the six IPOs ranged from a loss of 12 percent for Mitel Networks Corp. to an advance of 13 percent for SPS Commerce Inc. Codexis rose 2 percent to $13.26 in Nasdaq Stock Market trading. DynaVox ended unchanged at $15 and Alimera was unchanged at $11.

Seven companies attempted initial sales yesterday, offering $1.1 billion of shares, data compiled by Bloomberg show.

While six completed deals in the busiest day since Nov. 8, 2007, only SPS Commerce raised more than it originally sought in its prospectus, according to data compiled by Bloomberg. The Minneapolis-based company, which sells software that enabling businesses to manage orders from their suppliers, rose to $13.60 from its IPO price of $12.

Codexis, whose backers include New York-based Pfizer Inc. and Royal Dutch Shell Plc of The Hague, sold 6 million shares at $13 each after asking for as much as $15 apiece, data compiled by Bloomberg show. The Redwood City, California-based company has lost money every year since its inception in 2002.

Relative Value

At $14 a share, Codexis estimated buyers would get $3.13 of net tangible assets, a measure of shareholder equity that excludes assets that can’t be sold in liquidation. That would have been 59 percent more than the median for biomedical companies and alternative-fuel producers, Bloomberg data show.

DynaVox of Pittsburgh sold shares at $15 each after seeking as much as $17. Based on its SEC filing before the IPO, the company was valued at about 35 times earnings.

While DynaVox says it’s the largest company within its industry and has no “dominant competitors,” the valuation would have been almost double the median of 18 times for 100 computer-software companies tracked by Bloomberg.

Alimera, Global Geophysical Services Inc. and Mitel Networks were forced to cut offerings after failing to drum up enough investor demand. Alimera, the Alpharetta, Georgia-based developer of treatments for diseases of the retina, priced 6.55 million shares at $11 after offering 6 million at $15 to $17.

Global Geophysical, which collects underwater seismic data, sold 7.5 million shares at $12 each after the Missouri City, Texas-based company offered 11.5 million at $15 to $17.

‘Saturation Point’

The amount raised was 54 percent less than the maximum $196 million that it sought. The stock closed unchanged at $12 in New York Stock Exchange trading.

Mitel Networks, the Ottawa, Ontario-based maker of software that lets businesses make telephone calls over the Internet, sold 30 percent less than it originally offered in its $147 million U.S. deal. The shares tumbled 12 percent to $12.30.

“Markets have reached a saturation point and people are stepping back,” said Sean Kraus, who oversees $2 billion as chief investment officer at Citizens Business Bank in Pasadena, California. “If they were properly valued, maybe they would have had a better outing.”

Excel Trust, the San Diego-based real-estate fund that invests in shopping centers, pushed back what would have been yesterday’s largest IPO.

‘Lukewarm Acceptance’

The property company’s deal was at least the 10th U.S. offering to be postponed or delayed this year, data compiled by Bloomberg show. IPOs had stumbled at the start of 2010 as the first 14 sales were cut by 22 percent on average and none were completed between Feb. 10 and March 1.

The revival since March pushed this year’s U.S. IPOs past initial offerings from Brazil, with American companies advancing more in their first month of trading, Bloomberg data show.

“The appetite for higher risk is slowly improving,” said Frederic Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. “It shows there was lukewarm acceptance from investors when deals price in the low end of the range or below the range. It’s still a much better marketplace than it was three months ago.”

To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net.

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