EDGAR Online's IPO SECrets Newsletter Editor: Timothy Middleton, EDGAR Online Analyst editor@edgar-online.com ***INSIDE THIS ISSUE IPO QUESTION OF THE WEEK: What Is a Reload Provision? IPO COLUMN OF THE WEEK: IPO Market Returning to Normal? IPO COMPANY PROFILE: Agere Systems (AGR): a Bargain at $6? IPO MIDWEEK UPDATE: Go Ahead. No, After You. Please, You Go First. VC COMPANY PROFILE: NuGenesis: Pharmaceutical, Scientific Data Management COMPANIES MENTIONED IN THIS ISSUE PEOPLE MENTIONED IN THIS ISSUE ----------ADVERTISEMENT--------------------- Free Annual Reports For Over 3,400 Companies For EDGAR Online customers only. Download or get printed copies of Annual Reports FREE. Go to http://edgar-online.ar.wilink.com to order today. -------------------------------------------- ---------------------------------------- ***IPO QUESTION OF THE WEEK*** ---------------------------------------- QUESTION: What is a reload provision? ANSWER: A reload provision is a feature in an option plan (or option agreement) that allows companies to issue new option grants to option-holding employees in exchange for retiring their former grants. The new exercise price is usually pegged to the current market price. The number of reload shares granted is equal to the number of shares delivered to exercise the option plus, in some cases, any shares withheld for tax withholding obligations, says Bruce Brumberg, editor-in-chief of MyStockOptions.com. The option generally expires on the same date that the original option would have. ---------------------------------------- ***IPO COLUMN OF THE WEEK*** ---------------------------------------- IPO Market Returning to Normal? IPOs have stopped going down. After months of battering, new equity offerings have shown faint signs of life in March. Six of the seven IPOs that began trading this month finished their first day in the black. Rather than soaring tenfold, as hot issues were doing a year earlier, they finished ahead modestly mostly in line with the traditional norm of leaving 10% or so on the table for aftermarket investors. Only the cream of the crop are getting through the IPO window, and they are performing more as they did historically, delivering reasonable returns, says Clint Morrison, head of equity research for Miller Johnson Steichen Kinnard, an investment bank in Minneapolis. The most successful launch was AFC Enterprises (AFCE), the No. 2 operator of fast-food chicken restaurants, such as Churchs and Popeyes. Priced at $17, it finished its first trading day, March 2, at $20.38 a gain of 19.9%. At press time the shares were trading around $18.75, up 10.3% from the IPO price. http://www.edgar-online.com/ipoexpress/company.asp?company=5222 The most highly touted deal of March, Loudcloud Inc. (LDCL), finished its first day of trading, March 9, at $6.16 some 16 cents, or 0.4%, ahead of the IPO price. It subsequently slipped to $5.50, 8.3% below the initial price. Loudclouds chairman is Marc Andreessen, formerly of Netscape. http://www.edgar-online.com/ipoexpress/company.asp?company=5036 Stelmar Shipping (SJH) found favor in the aftermarket, and has preserved it since its March 8 debut. Priced at $12, the shares finished their first day at $12.80 and were trading at press time at $13.20, a gain of precisely 10.0%. http://www.edgar-online.com/ipoexpress/company.asp?company=5280 The months sole loser was SureBeam Corp. (SURE), a maker of electronic pasteurization equipment for the food industry. Launched March 16 at $10, the shares closed their first day down 14.1% at $8.59. They have since recovered, but only to $9.25. http://www.edgar-online.com/ipoexpress/company.asp?company=4912 In its registration statement with the SEC, SureBeam reported a pro forma loss of $330,000 for the six months ended June 30, 2000, on revenue of $9.3 million. Losses, says Morrison, are not something IPO investors will tolerate these days. What were hearing from our customers is, theyre not interested; everything else is on sale, so theyll buy the stuff they already own, he says. To get them interested, its got to be very compelling, which means theres got to be immediate visibility in earnings and growth. It doesnt necessarily have to be a low-risk deal, but theres got to be a level of comfort with the story. --------ADVERTISEMENT----------------------- Purchase Business/Credit Reports from Dun & Bradstreet on over 11 million U.S. businesses. Click on the "Resources" link when you look up SEC filings for any public company, or search by company name and state at http://www.edgar.telebase.com -------------------------------------------- ---------------------------------------- ***COMPANY PROFILE*** ---------------------------------------- Agere Systems (AGR) $6 Price Called Bargain The scaled-down IPO of Lucent Technologies (LU) spin-off Agere Systems was priced Tuesday at a rock-bottom $6 a share, leading at least one major Wall Street firm to recommend buying the shares aggressively. Agere, which begins trading today on the New York Stock Exchange with the ticker AGR, is a world-leading maker of communications semiconductors, but investment bankers struggled for months to close the deal. It will fetch only $3.6 billion, far less than the $6.5 billion Lucent originally sought. Sanford C. Bernstein analysts Paul Sagawa and Matthew Nagle speculated in a research report Friday that Lucent would likely pull the offering, but wrote that if it didnt, We would be aggressive buyers. Debt-burdened Lucent is transferring $2.5 billion of debt to Agere in the deal, and could retire more if a 90 million share Green Shoe is exercised by the underwriters, which are led by Morgan Stanley Dean Witter. Only hours before the pricing, IPO followers were skeptical the deal would be done. Theres a lot of doubt that that one will make to the Street, Clint Morrison, head of equity research for Miller Johnson Steichen Kinnard in Minneapolis, said early Tuesday afternoon. Ageres IPO was filed in December, but nearly every passing week has seen the market for technology stocks decline and, with it, interest in this deal ebb. In February Agere set a price range of $15 to $20 for 370.3 million shares. Later that month it slashed the range to $12 to $14 and boosted the number of shares to 500 million. Last week it dropped the price to the current range, and increased the number of shares to 600 million. http://www.edgar-online.com/ipoexpress/company.asp?company=5197 The Bernstein analysts say a $12 price for the offering would still be a discount to rivals such as JDS Uniphase (JDSU) and Infineon Technologies (IFX). We believe the reduced price range is the product of poor market conditions, negative LU sentiment and the sense of desperation to get the deal done, they wrote in a March 23 research call. If the deal got the green light, however, the Bernstein analysts urged clients to snap it up. In the ($6 to $7) price range, Agere would trade at 2.1 times calendar year 2000 sales of $5.1 billion a 36% and 75% discount to comparables IFX and JDSU, respectively, the wrote. Already a strong business with leading products and attractive margins, we believe Agere will experience strong synergies as an independent company. LUs competitors will be more inclined to purchase components from an independent Agere. Allentown, PA-based Agere manufacturers communications semiconductors, including optoelectronic components and integrated circuits. It calls them the basic building blocks of electronic and photonic products and systems for terrestrial and submarine, or undersea, communications networks and for communications equipment. The 16,500-employee company had revenue in the fiscal year ended Sept. 30 of $4.71 billion, and a loss of $76 million. In addition to Morgan Stanley, the underwriting syndicate includes Bear Stearns, JP Morgan Securities, Salomon Smith Barney, Deutsche Banc Alex Brown, ABN AMRO Rothschild, SG Cowen Securities and Blaylock & Partners. Agere will have 1.64 billion shares outstanding. --------------------------------------- *** IPO MIDWEEK UPDATE FROM IPO EXPRESS*** ---------------------------------------- IPOs on Deck Smith & Wollensky Restaurant Group Inc. (SWRG) http://www.edgar-online.com/ipoexpress/company.asp?company=5349 EDGAR INSIGHT: Smith & Wollensky Restaurant Group Inc. of New York, NY, filed March 23 for an IPO. CE Unterberg Towbin is the lead underwriter. The proposed offering is expected to raise $57.5 million. The company will have 8.6 million post-offering shares outstanding. The company is a developer and operator of high-end, high-volume steak restaurants in the United States. The 1,812-employee company had 2000 revenue of $81.5 million and a loss of $6.4 million. Undone Deals Conexant Spinco Inc. (-TBA-) http://www.edgar-online.com/ipoexpress/company.asp?company=5147 EDGAR INSIGHT: Conexant Spinco Inc. of Newport Beach, CA, filed March 26 to withdraw its IPO. CS First Boston Corp. was the lead underwriter. The proposed offering was expected to raise $100 million. The spinoff of Conextant Systems Inc. (CNXT) develops semiconductor systems for broadband communications. The 1,500-employee company had revenue of $579.2 million for the fiscal year ended Sept. 30, and a loss of $232.8 million. Phase2Media Inc. (PTWO) http://www.edgar-online.com/ipoexpress/company.asp?company=4681 EDGAR INSIGHT: Phase2Media Inc. of New York, NY, filed March 26 to withdraw its IPO. Robertson Stephens Inc. was the lead underwriter. The proposed offering was expected to raise $57.5 million. The company is a leading Internet advertising sales and marketing organization that sells advertising inventory to branded Web publishers. The two year-old company had revenue of $9.3 million for the 12 months ended Mar. 31, 2000 and a net loss of $9.7 million. QK Healthcare Inc. (KRX) http://www.edgar-online.com/ipoexpress/company.asp?company=3910 EDGAR INSIGHT: QK Healthcare Inc. of Ronkonkoma, NY, filed March 26 to withdraw its IPO. Lehman Brothers Inc. was the lead underwriter. The proposed offering was expected to raise $176 million. The company is a national wholesale distributor of selected healthcare products to retailers, wholesale distributors, and pharmacy benefit managers. ---------------------------------------- **VENTURE CAPITAL COMPANY PROFILE** ---------------------------------------- by Udayan Gupta NuGenesis: Pharmaceutical and scientific data management Last year, pharmaceutical companies spent $26.4 billion dollars on R&D, triple the amount spent a decade ago, says the industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA). A firm that can help drugmakers use their R&D dollars more efficiently should expect to do well. Five year-old NuGenesis Technologies Corporation (www.nugenesis.com) - formerly known as Mantra Software -- designs data management software for science-based organizations. Applicable from research and discovery through manufacturing, it is for use by anyone who views data generated in a lab, or a large volume of data produced by disparate sources. For a pharma, that could be as much as 30% to 40% of their employee base, says Mike McGuinness, president and CEO. Based in Westborough, MA, NuGenesis provides product installation, training for users and administrators, and follow-on support. The software is deployable on a small scale five to 20 users or on an enterprise-wide scale where thousands of individuals contribute to a database. The software can be used to share data sets, graphs and reports. Though most of the firms customers are in pharmaceuticals and biotech, NuGenesis is branching out into medical devices, chemicals and food. We target our software to science-based industries, but the software is applicable to many markets, says McGuinness. NuGenesis has revenues, but no profits. Current clients include Abbott, Eli Lilly, Merk, Pfizer, Genentech, Biogen, DuPont, and Philip Morris, among others. We feel the total market for our products is $5 billion worldwide, that includes all science based industries, says McGuinness. In May 2000, the firm closed on a $25 million round of equity financing. Investors include TA Associates, BancBoston Ventures, Brentwood Venture Capital, Highland Capital, and St. Paul Venture Capital. NuGenesis is not planning any additional funding rounds at this time. Were very well funded, we have plenty of cash, says McGuinness. In February, the 180-employee firm announced it would partner with Oracle to allow users of NuGenesis software to share scientific data online. Competition comes from software giants International Business Machines Corporation (IBM), Microsoft Corporation (MSFT) and Siebel Systems, Inc. (SEBL). *** Siebel Systems (SEBL) revenue grew 120% to nearly $1.8 billion in 2000, according to its 10-K405 filed Monday. Earnings per share doubled to $0.24 from $0.12 in 1999. http://www.edgar-online.com/secrets.asp?d=1006835-0001006835-01-500005 *** Perkin Elmers (PKI) 10-K405 filed on Monday mentioned NuGenesis in its new products summary on chromatography data management software: The seamless flow of TotalChrom data into the NuGenesis(R) SDMS database provides laboratories with an integrated method of data capture and management, the Perkin Elmer filing said. http://www.edgar-online.com/auth/verity/display.asp?query=NuGenesis&filename=0000950135%2D01%2D000920&cik=31791 In addition to its Westborough, MA headquarters, NuGenesis has offices in The Netherlands, the United Kingdom, France, Germany and Italy. Venture Capital Investors: TA Associates BancBoston Ventures Brentwood Venture Capital Highland Capital St. Paul Venture Capital Executive Team: Michael E. McGuinness, president and CEO Ajit Nagral, Founder, EVP Daryl Grabus, CFO Done Deals, Udayans new book about the history of the venture capital industry, is now on sale: http://www.amazon.com/exec/obidos/ASIN/0875849385/edgaronline --------ADVERTISEMENT----------------------- EDGAR Online Compensation Express summarizes critical compensation data from SEC filings to create a complete profile of executive pay, including salary, stock options, bonus, and other income, all in one place. Check it out now at http://www.edgar-online.com/compexpress/ -------------------------------------------- ---------------------------------------- **COMPANIES MENTIONED IN THIS ISSUE*** ---------------------------------------- Abbott ABN AMRO Rothschild AFC Enterprises Agere Systems BancBoston Ventures Bear Stearns Biogen Blaylock & Partners Brentwood Venture Capital CE Unterberg Towbin Churchs Conexant Spinco, Inc Conextant Systems, Inc CS First Boston Corp Deutsche Banc Alex Brown DuPont Eli Lilly Genentech Highland Capital Infineon Technologies International Business Machines Corporation (IBM) JDS Uniphase JP Morgan Securities Lehman Brothers Inc Loudcloud Inc Merk Microsoft Corporation Miller Johnson Steichen Kinnard Morgan Stanley Dean Witter NuGenesis Technologies Corporation (formerly Mantra Software) Perkin Elmer Pfizer Pharmaceutical Research and Manufacturers of America (PhRMA) Phase2Media Inc Philip Morris Popeyes Restaurants QK Healthcare Inc Robertson Stephens Inc Salomon Smith Barney Sanford C. Bernstein SG Cowen Securities Siebel Systems, Inc Smith & Wollensky Restaurant Group Inc St. Paul Venture Capital Stelmar Shipping SureBeam Corp TA Associates ---------------------------------------- **PEOPLE MENTIONED IN THIS ISSUE*** ---------------------------------------- Andreessen, Marc Grabus, Daryl McGuinness, Michael E. Morrison, Clint Nagle, Matthew Nagral, Ajit Sagawa, Paul ---------------------------------------- ABOUT THE EDITOR --------------------------------------- IPO SECrets, published every Wednesday, is edited by EDGAR Online Analyst, Timothy Middleton. Timothy has covered business and financial topics for The Wall Street Journal, The New York Times, Dow Jones News Service and Crain's New York Business. Twice nominated for the Pulitzer Prize in investigative journalism, his weekly business reports can be heard on WCBS Radio and Microsoft MoneyCentral Radio. For press, syndication, and advertising inquiries, contact Group Publisher Hank Berkowitz at hberkowitz@edgar-online.com ---------------------------------------- Copyright 2001, EDGAR Online, Inc. http://www.edgar-online.com ISSN# 1533-9068 ---------------------------------------- DISCLAIMER: The EDGAR Online report contains observations of its editor Timothy Middleton, a consultant of EDGAR Online, as well as observations of Udayan Gupta, Bruce Brumberg and other contributors. All observations are for informational purposes only. These statements and expressions are the sole opinions of Mr. Middleton and other contributors and EDGAR Online does not endorse nor necessarily agree on such statements and expressions. Factual statements in this report are made as of the date stated and are subject to change without notice. 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