by David Shabelman
[Posted on November 20, 2007 - 5:20 PM]
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DiggInvestor apathy, shaky market conditions and the short work week converged on CreditCards.com Inc., which on Monday became the latest company to withdraw a planned initial public offering.
The Austin, Texas, online provider of credit card information attributed its decision to postpone the IPO to market volatility. The company had registered to sell 10.7 million shares priced at $13 to $15 each. Assuming a $14 per share price, CreditCards.com was seeking to raise roughly $108 million. It had planned to use a portion of the IPO proceeds to wipe out $79 million in debt. The company offered no timetable for making another attempt at going public.
CreditCard.com's move follows the recent postponement or withdrawal of a number of other offerings, including oil equipment maker Stewart & Stevenson LLC, fingerprint scanning device maker Cross Match Technologies Inc., cleantech firm NanoDynamics Inc., insurance and financial services firm Symetra Financial Corp., and life sciences firm NimbleGen Systems Inc.
Citing someone close to the CreditCards.com offering, Ben Holmes, publisher of IPO research firm MorningNotes LLC, said the deal was canceled because one of the selling shareholders refused to price the IPO below its proposed $13 to $15 range.
"They did the right thing by postponing it," Holmes said. "This was not a good week to bring out a deal. There were 27 offerings last week, and it's a holiday week. I would say they probably shouldn't have even put it on the calendar."
Indeed, there have been a flurry of offerings in recent weeks. Through Monday, 29 companies have gone public this month, the most since December 2006, when 29 companies also made their market debut. But the average first-day gain in November has been 6.2%, according to MorningNotes, the lowest since April, when 12 companies went public and gained an average of 5.8%.
CreditCards.com lets consumers use the Web to search for, compare and apply for credit cards. It was formed in 2005 by its president and CEO, Elisabeth DeMarse, and Austin venture capital firm Austin Ventures with the intent of acquiring an online financial services company. The group in 2006 purchased CreditCards.com LP for $133.8 million in cash and 2.1 million shares of stock from Daniel Smith, the company's former CEO. DeMarse and Austin Ventures in late 2006 tapped asset management company American Capital Strategies Ltd. of Bethesda, Md., to recapitalize the company with an additional $160.3 million in debt.
Austin Ventures holds a 65.6% stake in CreditCards.com; American Capital has a 9.6% stake, although those holdings would be reduced if the company goes public.
For the first nine months of 2007, CreditCards.com reported net income of $2.3 million on revenue of $44.6 million, compared with net income of $15.2 million on sales of $29.9 million for the year-ago period. Its income has tumbled this year in part because of a sharp increase in sales, marketing and other operating expenses.
Brian Hamilton, CEO of financial software company Sageworks Inc., expressed surprise at CreditCard.com's withdrawal of its IPO, but said he still expects the offering to eventually succeed.
"If you look at their financials and compare them with other companies going out, they stack up pretty well," Hamilton said. "They have strong revenues, cash flow from operations and the offering was reasonably priced."
That may not happen in 2007, however. Companies have a small window from next week until the middle of December to complete IPOs before the market for the holidays.
Scott Valentin, an analyst with Friedman, Billings, Ramsey & Co. said he doesn't expect any financial industry offerings to come to market until 2008. Although CreditCards.com does not face any financial repercussions from the ongoing credit and subprime mortgage crisis, the entire financial industry has been tarnished in the eyes of potential investors, he said.
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