High-tech: 'To market, to market' cry eases, but new stocks still come
Basement tinkerers, beware. If you are dreaming of cashing in on that matchbox-size computer or that miracle silicon chip, you had better have more than just a good idea.
Wall Street is no longer grabbing blindly at anything labeled ''high technology.'' Nor is it paying the sky-high prices that raised billions of dollars for new companies last year.
''We are seeing the cool light of dawn after a wild party,'' said Sanford Robertson of Robertson, Colman & Stephens, a California investment banking firm specializing in high-technology ventures.
But even if the dawn is a bit cloudy, a few rays of sunshine are peeking through for 1984. Mr. Robertson and other experts on Wall Street are calling this year a bad year only in relation to 1983, a frenzied one that raised $12.7 billion from 927 initial public offerings (IPOs) of stock.
''IPOs are still alive and well in 1984,'' said Thomas Unterberg of L. F. Rothschild, Unterberg, Towbin, an investment house that raised over a billion dollars in IPOs last year. ''But we will not repeat the insanity of last year.''
New issues have raised $838.1 million in the first quarter of this year, according to Securities Data Company, a New York statistical service, compared with $2.3 billion in the first quarter of 1983. ''It's a shakeout,'' Mr. Unterberg says. ''A lot of investment bankers lost their heads last year. Now they're stepping back . . . to see what happened.''
Out of the 20 largest IPOs last year, which together raised $2.15 billion, only five remain at or above their original offering prices. As a group, these stocks have fallen an average of 29 percent since their initial offerings, which is considerably more than the market dropped as a whole.
One top-20 company, Victor Technologies, a manufacturer of desktop computers, recently filed for a Chapter 11 bankruptcy. Its investors are suing the company and L. F. Rothschild, Unterberg, Towbin, which underwrote the deal. Two companies nurtured in California's Silicon Valley, Fortune Systems, a computer company, and Diasonics, a producer of medical scanners, have both seen their stock plummet to less than 20 percent of their initial pricing.
Victor, like several other major deals last year, was brought public mostly on promises. The two-year-old company had never had a profitable year. Estimated earnings were based on a short period of high sales volume and, in retrospect, were ''completely unrealistic,'' according to one Wall Street expert. Victor's initial pricing was set at $17.50 a share. When the company declared bankruptcy, the stock had nose-dived to only 12 cents a share.
''This year, investors are being much more selective in what they buy,'' said George Needham, a managing director of First Boston's corporate finance department. Companies must be further along in their growth cycle to be attractive to investors, according to Mr. Needham. ''They will have to have more than just one quarter of profitability.''
A few notable successes also emerged out of last year's free-for-all. Porex Technologies, a manufacturer of medical supplies and a mail-order drug supplier, is selling at almost three times its offering price of $8.50 a share. Other IPOs remain strong. Apollo Computer, a Boston company specializing in computers for engineering functions, has sustained its high offering price of $22 a share. Mack Trucks is selling at 30 percent over its original price.
Glen King Parker, chairman of the Florida-based Going Public newsletter, is optimistic about the 1984 IPO market. ''If the stock market picks up, we could still have a five- or six-billion-dollar year,'' he said. In any case, according to Mr. Parker, a vibrant IPO market is here to stay, even if it does not reach the peaks of 1983.
''We still have good companies out there,'' he said, ''and we still have a strong demand for the good companies, the ones who are sure-fire winners.''