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NeoPhotonics, Epocrates Lead Busiest U.S. IPO Week Since 2007

LinkedIn Corp. Company Headquarters in California
LinkedIn Corp. filed for the first IPO by a major U.S. social-networking company. Photographer: David Paul Morris/Bloomberg

Silicon wafer makers, health care-software providers and Chinese menswear retailers are leading the busiest week for U.S. initial public offerings since 2007.

NeoPhotonics Corp., which makes circuits for high-speed communications networks, Epocrates Inc., a provider of medical software for mobile devices, Shanghai-based Zuoan Fashion Ltd. and at least nine other companies plan to raise $1.1 billon combined this week, Securities and Exchange Commission filings show. The last time more IPOs were completed was in November 2007, just as the Standard & Poor’s 500 Index was beginning its descent into the worst bear market since the Great Depression.

Initial sales are increasing after Nielsen Holdings NV completed the biggest private equity-backed U.S. IPO on record last week and shares of Demand Media Inc. rallied following the first venture capital-led offering of 2011. BankUnited Inc., backed by Blackstone Group LP and Carlyle Group, priced its sale above the forecast range, while LinkedIn Corp. filed for the first IPO by a major U.S. social-networking company.

“You get some good acceptance and some good price movement, and then more companies come to market,” said Richard Sichel, who oversees $1.5 billion as chief investment officer at Philadelphia Trust Co. in Philadelphia. “Investors are willing and able to participate in all types of companies and drive the price higher in this relatively positive atmosphere.”

Relative Value

NeoPhotonics, backed by venture capital firms Oak Investment Partners of Palo Alto, California, and Menlo Park, California-based Draper Fisher Jurvetson, may sell 7 million shares at $9 to $11 each as early as today, according to its SEC filing and data compiled by Bloomberg. The San Jose, California-based company, which has posted net losses since at least 2005, may have earned $3.89 million last year, based on annualized nine-month net profit data from the filing.

The midpoint offering price would give NeoPhotonics a market value of $230 million, or 1.3 times estimated 2010 sales of $177 million, data compiled by Bloomberg show. That’s 42 percent less than the median of 2.26 for 11 U.S.-traded peers.

Demand Media, the Santa Monica, California-based provider of low-cost story and video content created by freelancers for websites, surged 33 percent in its first day of trading last week. The company, run by former MySpace Inc. Chairman Richard Rosenblatt and backed by Oak Investment and Menlo Park-based Spectrum Equity Investors, raised $174 million.

LinkedIn, Facebook

LinkedIn of Mountain View, California, filed last week to raise $175 million in what may be the first of several share sales by social-networking companies. Chicago-based Groupon Inc. is in talks with banks about a public offering, while Facebook Inc. in Palo Alto may wait until 2012 to hold an IPO, three people familiar with the matter said last year.

Sequoia Capital and Greylock Partners in Menlo Park are among LinkedIn’s venture capital backers.

Epocrates, which is backed by Draper Fisher Jurvetson, will lead six health care-related offerings this week. The San Mateo, California-based company plans to sell 5.36 million shares for $13 to $15 each tomorrow.

At the midpoint price, Epocrates would be valued at $312 million, or 3.2 times estimated sales for 2010. That’s more than the median ratio of 2.5 for 20 U.S.-listed providers of medical information, data compiled by Bloomberg show.

“This could possibly be a litmus test for buyers’ appetite in the sector,” said Paul Bard, director of research at Greenwich, Connecticut-based IPO investment firm Renaissance Capital LLC. “If the majority of these deals price and they trade moderately well, it would be viewed as a success.”

Private Equity

Tornier BV, the Amsterdam-based maker of hip and knee replacements that’s 63 percent-owned by private-equity firm Warburg Pincus LLC of New York, will sell 8.75 million shares at $19 to $21 each on Feb. 2, its SEC filing said.

Nielsen, the New York-based television ratings company owned by New York-based Blackstone and KKR & Co., Carlyle in Washington and Thomas H. Lee Partners LP of Boston, raised $1.9 billion last week. That surpassed the $1.65 billion IPO by Wichita, Kansas-based Spirit AeroSystems Holdings Inc. in 2006 to become the biggest from a private equity-backed LBO target on record in the U.S., according to data compiled by Bloomberg.

BankUnited, the Miami Lakes, Florida-based lender taken over in 2009 by Blackstone, Carlyle and New York-based WL Ross & Co. and Centerbridge Capital Partners LLC, raised $783 million last week, more than double the amount the bank originally registered to sell last year.

Zuoan Fashion, China’s second-largest casual menswear retailer, is selling 6.9 million American depositary receipts at $10.50 to $12.50 today, SEC filings show.

Companies from China accounted for almost 25 percent of the initial offerings completed in the U.S. last year, raising almost $4 billion, according to data compiled by Bloomberg. The 41 U.S. IPOs by Chinese companies exceeded the 37 completed in 2007 as the most on record, the data show.

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