Aquantia Corp. (NYSE:AQ)
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The U.S. IPO market limped through the final day of a slow week Friday, with two offerings generating little interest from investors.
Acquity Group Ltd. (AQ) and Edgen Group Inc. (EDG) both priced below their expected ranges and failed to gain much traction during their trading debuts. Edgen's stock closed down 13.6%, while Acquity's ended the day down 4.2%.
The pair wrap up a ho-hum week in the U.S. IPO market, with the only other offering, from telecom software specialist Envivio Inc. (ENVI), pricing below range and declining on its first day Wednesday. That stock closed up Friday at $9.20, 2.2% above its IPO price of $9 a share.
Two other deals that had been expected this week never materialized. Supernus Pharmaceuticals Inc. has been delayed until next week after failing to price, while China Auto Rental Inc. was postponed indefinitely. They were two of the weakest offerings planned, with investor appetite running low for early-stage drug developers or any deals from China.
This week's roster of deals was a letdown after a stellar lineup last week, headlined by data mining software company Splunk Inc. (SPLK), which rose 108.7% on its debut; five other deals that came out last week also made first-day gains, with only one pricing below range.
Although the quality of the deals launched this week paled compared to the likes of Splunk, there were other factors that dragged on the IPO market, said Scott Sweet, managing director of research firm IPOBoutique.com. Primary among them was the fact that institutional investors, who are big buyers of IPOs, were distracted by a busy earnings week for existing stocks, he said. Several big names like Amazon.com Inc. (AMZN), Expedia Inc. (EXPE) and Apple Inc. (AAPL) reported strong results.
On Friday, Acquity's stock closed at $5.75 a share on the New York Stock Exchange, below its IPO price of $6. A total of 5.6 million American Depositary shares were sold at a price below its expected $8 to $10 price range.
Headquartered in Hong Kong, Acquity provides digital marketing and e-commerce services to more than 500 companies, including Allstate Insurance Co. (ALL), Discover Card's mobile business, and W.W. Grainger Inc. (GWW).
Acquity helps clients improve their e-commerce websites and convert site visits to sales, provides digital marketing such as online promotions, social networking feeds and mobile marketing, and designs--and in some cases operates--online stores.
Acquity has offices in 10 cities in the U.S. and wants to grow its business in China, where it has two offices. To date, all its revenue has come from clients in the U.S. It already operates the Chinese websites of several clients, including General Motors Co. (GM, GMM.U.T), Motorola Mobility Holdings Inc. (MMI) and Underwriter's Laboratories Inc.
In 2011, its revenue rose 47% to $107 million; 70% of its revenue came from recurring clients. It reported net income of $8 million compared to a loss of $3 million in 2010. About 50% of its revenue came from the retail sector in 2011
Edgen's stock closed at $9.50 a share on the New York Stock Exchange, down from its initial public offering price of $11. It sold 15 million shares at a price below its expected $14 to $16 range.
Headquartered in Baton Rouge, La., Edgen Group distributes parts used in the oil and gas industry, such as steel pipe, valves, and heavy plates. It sources its parts from a network of more than 800 suppliers and sells and distributes them to more than 2,000 customers in 15 countries.
The company's offering comes two weeks after a similar deal from MRC Global Inc. (MRC), considered the largest global distributor of pipe, valves and fittings to the energy industry. MRC Global ended its first day flat with its IPO price after selling its stock at the low end of its expected range; on Friday it was trading at $20.02, below its IPO price of $21.
In 2011, Edgen's sales increased 45% to $911.6 million due to increases across all its our market segments, as customers increased their spending on projects and replacement parts. It reported a loss of $24.5 million compared to a loss of $98 million in 2010.
Like any company tied to the energy industry, Edgen's business can be affected by oil and gas prices. In particular, a significant decline in prices could reduce demand for its prices as energy companies do less drilling and exploration. The steel industry is also cyclical, and prices for the steel products it distributes can fluctuate, affecting its profit margins.
-By Lynn Cowan, Dow Jones Newswires; 202-257-2740; firstname.lastname@example.org