IT WAS A DISAPPOINTING TRIP to the public equity markets for Dynacare, Inc. last month. The lab company raised only $50 million in its initial public offering (IPO).
Dynacare had hoped to harvest as much as $89 million from this IPO. Plans were to sell seven million shares at about $13 per share. But after Dynacare’s “road show” to the professional investment community, underwriters placed five million shares at a price of $10 per share. The IPO closed and funded on November 7, 2000.
More Lab IPOs To Follow
With Dynacare’s IPO completed, there are still two more laboratory companies which hope to place IPOs. They are Specialty Laboratories, Inc. of Santa Monica, California and American Medical Laboratories, Inc. (AML) of Chantilly, Virginia.
Next to tap the public equity market will be Specialty Laboratories. As this issue of THE DARK REPORT goes to press, December 4 is the scheduled closing date for Specialty’s IPO. However, because of the stock market’s temperamental nature, it is very common to defer or delay an IPO until the underwriters believe the time is most auspicious.
Specialty Laboratories would like to raise $86.3 million through its IPO. Because it and AML continue to be in an SEC-mandated “quiet period,” neither executives from the two lab companies nor underwriters involved in the public offerings will make public statements. However, conversations with knowledgeable individuals in the investment community seem to indicate that Specialty Laboratories is seen as a particularly attractive investment.
It is Specialty Lab’s unique concentration on esoteric testing which seems to appeal to professional investors. They understand enough about diagnostic testing to realize that research into genetics and molecular medicine will find first application in esoteric lab tests. They believe an investment in Specialty Laboratories positions them to profit from such yet-to-occur opportunities.
A target closing date for AML’s IPO has not been set as of this date. AML seeks to raise $115 million dollars. Because Dynacare raised only 56% of its goal, AML may believe that the stock market is not as excited about companies involved in routine testing as they are about companies involved in specialty esoteric testing. Another factor may be the recent softening in share prices for Quest Diagnostics Incorporated.
Timing and investor interest is important for both Specialty Laboratories and AML. If both lab companies can raise their targeted amount of capital, it will strengthen their competitive position in the lab marketplace. But if they can’t hit their funding goal, each lab has the option of accepting less funding or deferring the IPO until a later date.